Trading newbie needs a hug

[tickerjunkie]

About a month into my life as a spread trader, I could use some feedback.

I use the 1-2-3 system that looks for shares whose trend has bounced back from a minor correction. After a solitary success and small string of failures that the wonder of stop-loss has kept to a £30 deficit each time, I have learnt that one system alone is far from infallible.

I now couple it with the additional criterion that I will not back a stock to break a support or resistance level with which it has struggled in the past.

This looks to be paying off this week with the surge of EBAY but it has introduced me to the additional hurdle of timing. I gave EBAY an hour yesterday before joining the roller-coaster. A downward trend that I initially hoped was just consolidation, then snowballed to wipe out my stop loss, before - surprise, surprise - zooming back up to paydirt country again.

My starting bank was £1,000. On the advice of one article I read, I put my stop loss at 3% of my initial bank. Betting £0.50 a point, that gives me a 60-point leeway.

The bank now stands at £888. I'm not panicking but I would welcome some insight from more experienced traders. Was yesterday just part of my learning curve or should my stop-loss be more relaxed?

And exactly how do you break the habit of staring at a ticker like a rabbit caught in headlights?

TJ

 

[dc2000]

Although I rarely trade indiviual shares I do trade EBAY and OSTC now and then, on EBAY I use a stop at 200 points as I find it can be quite volotile, but then I could be looking for a longer move than yourself. The 3% rule is a good rule and money management is king in this game, but I would look to widen you stoploss and lower your stake if you are finding that the whip action of the shares you trade in are constantly hitting your stop levels.

 

[Trader333]

What matters in the trade you made on Ebay is that you planned your trade and stuck to your plan even though it was a net loss. Now it is just as possible that Ebay could have kept on going against you and then you would be patting yourself on the back that you go out when you did. In many cases people would not have done what you did ( which was the absolute correct action), and then made a big profit on the day.

This causes "Negative Re-inforcement" which is one of the biggest killers for traders in that they believe that if they dont stick to the original plan and just wait the market will come back and give them a profit. It may work a few times but then at some point it most defintely wont and I have heard stories of traders losing more than half their account in just one trade because they didnt follow their own plan.

In terms of planning your trade and executing your plan you did the right thing and this is a vitally important area for successful trading. You may well need to gain more expertise in timing your trade or other TA type aspects which you can gain by a number of ways such as books, these boards and coaching.


Paul

 

[Tileman]

Why not trade less volitile stocks at first ,so you can run tighter stops with the same stake until you find a system that works for you.

 

[Mr. Charts]

You cannot tell in advance what a stock is going to do or when - pretty obviously. You need to plan what to do, whatever happens. That includes doing nothing.
However, after Tuesday's run, would you not factor into your assessment there might be a pause and some choppiness? On a stock like EBAY, look at the overall market to put things into some sort of perspective. If the market is choppy, then you need different tools to do the job, tools which relate to the nature of the market as it is. Otherwise you need different stocks to apply the same tools to.
So, if you are a pure trend player you must look for a stock which is trending, not try to apply trend following tools to something which is not trending.
Also at this stage in your putative career as a trader, look at the range through which the stock is moving over a five minute period on the day - not the previous day. Although this can change suddenly, consider whether a typical move through a five minute range would whipsaw you out.
There are many other factors to consider, including time frame, but these should get you started.
HTH

 

[TheBramble]

And exactly how do you break the habit of staring at a ticker like a rabbit caught in headlights?

TJ - I don't know what timeframe you're trading (looks like intraday), but you could consider totally automating your system.

Set all your stops, limits etc and then walk away.

You may get the occasional intra-bar spike getting you in/out when you wouldn't have done so manually, but as with all things - it's a tradeoff.

Agree totally with Trader333's comments - you executed your system perfectly yesterday with EBAY.

 

[tickerjunkie]

Trading newbie gets his hug

Thank you all for your kind and helpful comments.

While I have followed the markets for four years now, this was my first post to a trading board and I was braced for a response along the lines of "Here we are making our third million of the day and you're pestering us with 50p ticks on Ebay, you peasant", so your compassion is gratifying.

Some of the points you make I had in fact picked up on yesterday, particularly the volatile nature of high-price stocks. Even with a stop-loss in place, watching the Ebay price soar and plummet made my mouth go dry. I think I'll filter out anything over $50 in future, or at least check its typical price range first.

As for the comment about trending shares, I kicked myself for entering a trade on the FTSE stock GUS yesterday, only noticing afterwards that the thing has been moving more sideways than upwards of late; something I should have spotted before. Another mistake that I hopefully will never make again. I have closed my position on that today for the princely profit of £2.20.

This will doubtless be its cue to end two days of slothful meanderings and take off for the moon but it was a flawed trade so I've wiped it. It is pleasing to learn that this kind of hard-nosed objectivity is seen as the way to go in trading circles.

You've been a great help, people. I'll let you get back to those uranium futures.

 

[Naz]

Isn't trading EBAY intra day done with Level 2 direct access.Using the right tools for the job is a big bonus.Also Goldman is the guy to watch,no one's mentioned this.

I think it's hard trading EBAY intra day with a sb company, i dont think its a newbie stock, i think that some of the stops mentioned are to far away.Why not shadow the ax and use a tighter stop.

For me a stop is where i know i'm wrong.Not a %ge of my position.If Goldman is holding support then my stop is underneath him.If he goes i'll get out.i'll be gone before the chartist has seen it or understands it and long before the sb trader has a chance to comprehend whats happening.

These i believe are the facts of trading a stock like EBAY.

This is just my opinion and yours will probably be different.I'm just trying to show the reality of trading these type of more volatile US stocks.

 

[Louise]

I have been reading these forums for a while now and gather the need to start small, and have tight money management. That certainly seems to be about the one thing just about everyone agrees on. Given that as a beginner you are intent on spreadbetting I wonder if anyone might have any views on, broadly speaking, the best type of stocks to aim for?

Thank you for any opinions on this.

 

[Trade_Ideas]

Let the pattern come to you vs. you looking for it

About a month into my life as a spread trader, I could use some feedback.

I use the 1-2-3 system that looks for shares whose trend has bounced back from a minor correction. After a solitary success and small string of failures that the wonder of stop-loss has kept to a £30 deficit each time, I have learnt that one system alone is far from infallible.

I now couple it with the additional criterion that I will not back a stock to break a support or resistance level with which it has struggled in the past.

This looks to be paying off this week with the surge of EBAY but it has introduced me to the additional hurdle of timing. I gave EBAY an hour yesterday before joining the roller-coaster. A downward trend that I initially hoped was just consolidation, then snowballed to wipe out my stop loss, before - surprise, surprise - zooming back up to paydirt country again.

My starting bank was £1,000. On the advice of one article I read, I put my stop loss at 3% of my initial bank. Betting £0.50 a point, that gives me a 60-point leeway.

The bank now stands at £888. I'm not panicking but I would welcome some insight from more experienced traders. Was yesterday just part of my learning curve or should my stop-loss be more relaxed?

And exactly how do you break the habit of staring at a ticker like a rabbit caught in headlights?

TJ

It seems you already have asked yourself: How do I trade? What are the ideal conditions that I look for? Tighten up your answers to these questions, then use your discipline to stick to those conditions.

http://www.trade-ideas.com/GettingStarted.html?name=Intro+Setup

This tool can help.

 

[darktone]

I have been reading these forums for a while now and gather the need to start small, and have tight money management. That certainly seems to be about the one thing just about everyone agrees on. Given that as a beginner you are intent on spreadbetting I wonder if anyone might have any views on, broadly speaking, the best type of stocks to aim for?

Thank you for any opinions on this.

IMHO if you are intent on using Sbet then at least trade an instrument with a fixed spread such as E/$ and dont day trade. If your strat allows to buy at limit then you are on a pretty level playing field with what a broker can offer, Try any other method at your peril, the platforms are very basic and dont allow you to control the risk properly when things get volitile. dont day trade.

last thing is dont day trade. ie position or swing trade, if you can make money trading in a position or swing style with a broker then you can do it with a SB.

regards
dt
PS. dont day trade with a SB co

 

[DaxTrader]

Mr C's

"If the market is choppy, then you need different tools to do the job, tools which relate to the nature of the market as it is. Otherwise you need different stocks to apply the same tools to.
So, if you are a pure trend player you must look for a stock which is trending, not try to apply trend following tools to something which is not trending." - so true

This is such a crucial point, and easy to forget in the heat of the moment.

Trading one or a small handfull of instruments either means you will be sitting on your hands a lot (and getting out of practice and frustrated in dead periods), or means you have to have trend trading techniques as well as counter trend techniques.
Most people (me included) don't have the mental dexterity to flip between going counter trend then with the trend effectively.

 

[socal]

Strategies for different opportunites

Mr C's

"If the market is choppy, then you need different tools to do the job, tools which relate to the nature of the market as it is. Otherwise you need different stocks to apply the same tools to.
So, if you are a pure trend player you must look for a stock which is trending, not try to apply trend following tools to something which is not trending." - so true

This is such a crucial point, and easy to forget in the heat of the moment.

Trading one or a small handfull of instruments either means you will be sitting on your hands a lot (and getting out of practice and frustrated in dead periods), or means you have to have trend trading techniques as well as counter trend techniques.
Most people (me included) don't have the mental dexterity to flip between going counter trend then with the trend effectively.

There is a time to go long a time to go short and a time to do nothing. We have been working very hard to create strategies for just such situations. Take a look at this I think you wil be pleased! trade-ideas.com/GettingStarted.html

 

[Quercus]

"There is a time to go long a time to go short and a time to do nothing. "
My My what a revelation!

 

[socal]

People often over trade

"There is a time to go long a time to go short and a time to do nothing. "
My My what a revelation!

The link I provided in my previous post is designed to help figure out when to do which. I was not trying to be smart.

 

[Louise]

Thanks for reply darktone.

IMHO if you are intent on using Sbet then at least trade an instrument with a fixed spread such as E/$ and dont day trade. If your strat allows to buy at limit then you are on a pretty level playing field with what a broker can offer, Try any other method at your peril, the platforms are very basic and dont allow you to control the risk properly when things get volitile. dont day trade.

last thing is dont day trade. ie position or swing trade, if you can make money trading in a position or swing style with a broker then you can do it with a SB.

regards
dt
PS. dont day trade with a SB co

Thank you very much for taking the time to reply. I am just at quite an early stage in learning about trading. So far I have not looked at Forex at all, only stocks. There is a great deal to learn and for me personally I think it is going to take some time. Once again thank you very much for your views which are very welcome.