Best Thread The Basics of Trading

[FTSE Beater]

Hi Edster

Have a look at Basic Strategy
It's a strategy that I found works well.

Going back to your question, 'Technical Analysis Of The Financial Markets' book by JJ Murphy is a good book, however it won't teach you how to spot chart patterns as that comes with time. My personal view is that you should spend more time looking at the charts and seeing them develop. I believe this will teach you more than any TA based book, but as I say - that's just my personal opinion.
If your unsure of your analysis, post a chart in the First steps forum and someone will be more than happy to look at it and give you advice

Hope this helps.

 

[Group27_Lee]

Slightly off topic - question on money mangement

Hi,

First real post here. I didn't know where to put it, but as this seems the right thread to ask basic stuff, I thought I'd put it here. Feel free to ask me to move it to another thread!

I recently caught the FTSE rising from the 4700ish level twice in the last couple of weeks. I took the first as a day trade and exited quick, mainly on gut feel and I'm still with the other trade now, for a gain of about 80 points, but I need to know where to get regular opportunities from.

My question is regarding money mangement, and making the most out of good trades. I understand about stop losses but wondered how to maximise the scaling in when on a winner. I spread bet and with Finspreads they allow you to put in both "buy at this level" and "sell here, if you've bought it" orders. With this in mind, how feasible is it to increase your stake every time a spread is covered?

For example, using my current trade, I am making £80 odd, but I am sure I could have made more. Spread is 6 points. I would like to set up orders to increase my stake every time my spread (6pts) is exceeded. This way I am increasing the stake as it rises, but only ever risking my initial move (6pts or stoploss) while I can retain my "proper" stoploss as well.

For example, again (bear with me!) I buy FTSE at £1/pt. It moves up 6 pts. My auto order is executed and buy another FTSE @£1, and again when it reaches 6 more pts. It peaks, for eg, at 60 and my TA stop loss is 50, where I exit. Instead of making 50pts * £1 = £50, I make ((50pts*£1)+44+38+32+26+20+14+8+2) £234 from the same trade. The profit of the covering the spread is always rolled on to fund the next buy. This way I only lose £1/point if the trade goes against me, rather than, say, £5+. Small loss vs large gain. If FTSE dips on the day, my auto sells take me out of danger as well.

Have I overlooked anything obvious, or would this work, as an EOD strategy?

I look forward to the next charts, where I'll have a go. Got to learn properly somehow, even if it means making an a*$e of myself Great thread btw.

 

[Edster]

Thanks for the link to the Basic Strategy FTSEBeater. I'll check that out next.
I've posted three charts that I've traded this year using my 'what goes up must come down and vice versa' strategy which worked for 10 months but due to not using stop losses has, as you might say, come a cropper. (Major 2004 lesson learned - ALWAYS use stop losses!)
The first chart is CCL. I've had a few good trades on this share but it doesn't seem to want to 'come back down again'.
The second one is AZN. By far the most successful share for me this year but seems to have crashed a bit due to 2 drugs not being approved.
The third is the NASDAQ. I thought I'd try it towards the end of the year but have been a bit stung by it (the sting is still there!)


Anyway, in general, riding the 'sine wave' seems to be a good strategy if you a) find the right share and b) you use stops.

Any input on the charts would be very grateful and would help me on my learning curve.

Cheers,

Edster

 

[FTSE Beater]

Hi Edster

Thank you for posting your charts up.
One thing I would say is that, what goes up doesn't neccessarily come back down and even if it does, it might not come back down on the time scale your looking at. Think of Marconi, that went down and a lot of people thought it would come back up - it never did!!

CCL - has had a massive run up, and I would be interested to know where you got in on this one, so I can add something a little more constructive

AZN - Oh yes, this has been a wonderful trading sahre over the last year. Again, if you could post your entry and exit dates, that would be wonderful.

NQ - Recently the Naz has been bouncing around and not doing a lot. Nice little ascending triangle forming. How have you been traidng the NQ?

If you could let me know the above, I'll be able to give you a better assessment, rather than just a guess at your reasoning

-------------------------------

Hi Group27_Lee

I've replied to your post Here - I hope your don't mind.
Thanks for your kind comments, they are much appricated

 

[Edster]

Hi FB,
I entered the CCL short trade on 02/12/04 when the price was around 3000p.
The AZN long trade was on 27/09/04 when the price was at around 2350p (just after a major fall)
NASDAQ - It was only my second or third trade so I hadn't really been following this at all (There was another big mistake). I shorted on 27/10/04 when it was around 1485.

As you can see, three pretty big 'ouches' all at once. I must admit that it's knocked my confidence a bit but maybe that's what I needed?

Re AZN. Do you want me to post ALL of my entry and exit dates / prices for the whole year?

I look forward to your comments / criticisms.

Cheers,

Edster

P.S. How do you post charts as thumbnails instead of attachments?

 

[Gumrepus]

This my firstattempt at posting charts for comments, so here goes. Any thoughts will be greatly appreciated.

Billiton. I hope this is a good example of a triangle breakout. The break was with decent but not exceptional volume, was that enough? There is strong? resistance at about 627. Should this have made the trade a no go? I was long anyway and seem to have got away with it. My support lines at approx. 530/560 seem messy. also I'm very unsure about how I should measure the target.

Antofagasta. This attempted to break out of the triangle yesterday, but can this be really classed as a triangle? There is that line at 11.80ish that is only there because of a one day spike. My feeling, rightly or wrongly is, that the triangle is negated because of that and this is evidenced by yesterday's high which pierced the triangle but failed to hold at the close.

Go-Ahead. I'm long here but I am now confused. I felt that the beginning of December established a new, steeper trendline but that has now been breached. What now? The December resistance at £15 was messy, too messy for me to feel able to put in a resistance line, although there is one with 3 or 4 touches. Should I have got out at 1516ish? I didn't and have drawn in that sloping support line because of the bounce at £15. Is that a fairy tale? I do a bit of sailing and in the world of the marine navigator there is an adage - "making the chart fit your mind." My stop is just below £15.

Tesco. Again I'm long here and have had one decent trendline superseded by a steeper one. There's that support line at 314 - is that valid or have I made the chart fit the line? There's one I put in at 311.5, is that valid? My stop is below there and was nearly taken out. 310 was tested today. I'm going to keep it there. Should I have got out sooner? I could have got out on Thursday or Friday but I didn't feel that the trendline had been sufficiently violated. Should I have lowered the trendline to Friday's low?

Sorry to ramble on and ask so many questions, and I hope that I have sufficiently explained my reasoning even if I have beed dull.

Gumrepus

 

[dbphoenix]

Nobody got any suggestions about AZN / CCL / NQ yet?

Just a suggestion, Edster. You say that you "need to be able to read the charts so that [you] can try and predict what will happen next". Before devoting weeks or months or years to this pursuit, you ought to determine whether or not it is possible to make this sort of prediction. If it isn't, then perhaps you should consider revising your opinion of the purpose of charts and charting.

 

[Edster]

Just a suggestion, Edster. You say that you "need to be able to read the charts so that [you] can try and predict what will happen next". Before devoting weeks or months or years to this pursuit, you ought to determine whether or not it is possible to make this sort of prediction. If it isn't, then perhaps you should consider revising your opinion of the purpose of charts and charting.

Hi DB. I don't really understand what you're trying to say. Are you saying that if I can't read the charts now then I shouldn't bother trying to learn?
I'm a newbie and was just after some advice on charts. It's easy to look at a chart that someone has already drawn trendlines all over and say 'Oh yes, I see that now' but looking at a 'blank' chart can give you a headache if you're not experienced.
Back to the charts that I posted - NQ has had quite a major reversal and CCL has come down a bit. I've ridden the waves on both and clawed back some useful pips to offset my losses so things aren't so bad. AZN still doesn't want to play ball though.

Cheers,

Edster

 

[JumpOff]

Hi Edster,
I think it's a questions of semantics about the word "predict" that gets bandied about on these boards quite a bit. DB has been encouraging many of us to stop guessing, or "predicting" what will happen next. He feels we are more likely to see our pots grow if we define our setups, entries and exits in advance and test them and to do the same with our larger trading plan. That way, you don't have to ask someone else, does this look right? Do you think this was an OK trade? You wait for the setups that you know have a high probability of making you some serious points with minimal risk.

I think it is entirely possibly in a strong bull market to make money even if you don't know what your doing (not saying that's you...), allowing a trader to feel they can predict the future - when really it's just a scenario that will eventually cost you all.

T2W is definitely the place to be if you want to learn how to trade (or maybe you are already an expert and I have misread your question?). If you want to learn more about defining and testing setups, and are willing to do so without using indicators, come join us in the price and volume forum.
JO

 

[JumpOff]

This my firstattempt at posting charts for comments, so here goes. Any thoughts will be greatly appreciated.

Gumrepus,
Welcome to the world of chart and comment! I still lose at paper trading, so for me to give you any kind of advice would probably border on criminal negligence. I expect someone will come along before too long and offer some comment. How have these trades worked out for you over the last week? Did you learn anything from them?
JO

 

[Lesley Saunders]

Hi, I've recently been investigating spread betting as well as general trading, and have bought the book 'Principles of Profit' from a website of the same name, I'm finding it v informative, but has anyone else got any feedback based on results? The man who wrote it is doing a seminar, but before committing to that I wanted to know if anyone has got longer term feedback other than a really interesting read!!
FTSE beater? anyone else? any thoughts?
many thanks
L

 

[jimmy1jag]

Lesley,

When I was doing my initial investigations of trading a couple of months ago, I came across a similar workbook for a similar price, which I was going to buy until I did a search on this site. I've just had a look at the site you mentioned (and am now expecting a whole load of marketing guff to come through my door for the next 5 years!) . The newspaper cutting of the curry restaurant owner caught my eye as I'd seen something very very similar on Vince Stanzione's website. Use Google to find the site. And search on here too.

I don't know what this particular guy's seminars cost, but would I be right if I estimated at £1500 - £2000+?

There is a huge amount of information on this site, all of which is free. (There is a fair amount of arguing too... just ignore that!)

I personally feel that you need to explore this site first, as well as the many links to other sites and you'll pick up a large amount of what's taught in workbooks / seminars for free.

Someone on this site advised me to set up a Finspreads account which, if you register for their "Trading Academy", will allow you to trade for as little as 1p per point. You need to put £100 into the account as a minimum start up. And you may very well lose £50 of that, or more, but you'll learn a lot.

Once you've done some reading on basic chart patterns (available in the thread and others and many other sites) - for free, and once you've worked out strategy, traded it, documented your all your trades, and feel that you're starting to find something that suits YOU, then you're best off looking for someone to provide you with 1 2 1 training rather than going to a seminar. (And I've heavily edited the learning process here!) They cost around £500 for a full day. They will vet you to make sure you're not an out and out gambler. Naz and MrCharts, 2 contributors to this site, are recommended by those who have used their services, and both spend most of their time trading and not teaching. They both trade live as part of the training. (Incidentally, I have nothing to do with these or any other traders!!!!) There are others who charge around the same amount. Look on this site for ratings of trainers. If you decide to go down this route, you need to contact your shortlist, talk to them on the phone and decide who suits you the best before commiting. If they come across a being logical, focussed, structured; you can understand what they say then you're halfway there! And be wary of salesmen!

All I can say, to conclude, is, be wary of marketing hype!!

I hope this helps.

 

[traderkay]

Guys... the thing is... If you take a 50/50 entry with 1:1 risk/reward then the result is breakeven. Now you try, to beat the market and create an edge - so you increase your reward to 2X your risk. This should gives you an edge but NO! In reality.. the win probability will drop to 33% and the loss prob will rise to 66% effectively eliminating the edge you meant to achieve.

 

[ale]

Has anyone got any advice of how to avoid or deal with spikes - by that I mean the out of range highs/lows that are apparently caused by the Market Makers playing silly B*****s and trying to break stop losses?
A good example of this is Rolls Royce with a sharp negative on July 7th and a sharp positive on July 8th.

 

[wwatson1]

ale how is this causing you a problem?

 

[ale]

It hasn't yet but I live in fear.
It must have happened to many more experienced traders.
Take a long trade on Rolls Royce at the beginning of May.
Buy in at say 245 with a stop at 225. Looks safe and makes about 10p before a large down spike to below 200 takes out the stop.
Buy in again mid May at 260 with a stop of 245. With a rise of 30p and raising the stop to secure gains, it's taken out again on July 7th with a blip down to about 245.
Under these circumstances it seems bad practice to use stops.

 

[Splitlink]

It hasn't yet but I live in fear.
It must have happened to many more experienced traders.
Take a long trade on Rolls Royce at the beginning of May.
Buy in at say 245 with a stop at 225. Looks safe and makes about 10p before a large down spike to below 200 takes out the stop.
Buy in again mid May at 260 with a stop of 245. With a rise of 30p and raising the stop to secure gains, it's taken out again on July 7th with a blip down to about 245.
Under these circumstances it seems bad practice to use stops.

We come back to the old, old question of where to put the stops.

You put in, what you thought, was a safe stop of 20 points below. When you get stopped out you are faced with the dilemma of how to get that 20 points back, which you have to do before you start making an overall profit again. You are not alone of us with this problem. I, and most of us have it. Perhaps it is better to try closer stops and, instead of losing 20 points at once, risk a lesser amount a few times?

This is what makes us individuals when it comes to decision making. There are no hard and fast rules.

Split

 

[ale]

Sorry,
I realise that I didn't make my point very clear.
The question is not related to where to put the stops but more about trying to avoid the blips.
Are there some stocks/sectors more prone than others? Should these be avoided?
If there has just been a blip is there likely to be another in a week/month?
If the stock hasn't had any blips in the last 3 years, is it off the MM's radar? Is there any way to determine what is on that radar?
How many people do not use stops if the stock is prone to blips?

 

[Splitlink]

Sorry,
I realise that I didn't make my point very clear.
The question is not related to where to put the stops but more about trying to avoid the blips.
Are there some stocks/sectors more prone than others? Should these be avoided?
If there has just been a blip is there likely to be another in a week/month?
If the stock hasn't had any blips in the last 3 years, is it off the MM's radar? Is there any way to determine what is on that radar?
How many people do not use stops if the stock is prone to blips?

Lots of people do not use stops because of the spike factor. I used to be one of them because I did not trust the SB companies. Now, I use them more.

No one can foresee when there will be a spike. If there is a shortage of stock the marketmakers make rock the tree to see who they can frighten into selling. The other reason is a panic, of which the massacre of July 7 is an example. No one could foresee that and after winning the Olympic nomination the previous day, it was the last thing to be expected.

I was stopped out that day . In a good previous day's trade I had moved my stop to just above breakeven. Finspreads stopped me out at that point even though the price fell another 25 points below it so I would like to give them full credit for that as I know that not everyone is happy with them.

In a nutshell, I don't think that spikes can be avoided and they come at different times of the day.

Split

 

[neil]

Some Technical approaches to Trading

Greetings readers,

I found this link on CBOT which might interest those of you looking for technical approaches to trading the Dow etc.

http://www.cbot.com/cbot/pub/cont_detail/0,3206,1180+26252,00.html

Enjoy.

Activity....Why not get some old charts and cover each with a piece of paper, then move the piece of paper, one price bar at a time, to the right and then pause at each uncovered price bar to decide if you would open/close/stay in that trade, plus where you would place a stop loss.