MY FTSE Rules
Welcome to my journal. This is the first entry in which I will explain some basic principles I follow, as well as what I have learned up to this point.
If anyone wants to contact me regarding anything in this journal I would welcome mail to:
[email protected]
I started trading in about October last year. Initially I started by buying a number of shares of different companies, hoping that the value of those shares would increase over time. I did not have a great deal of experience, but I had read alot of literature on the subject and watched alot of CNBC, so I was not starting as a complete novice. I initially chose my companies to invest in using resources like Investor's Chronicle and the broker recommendations. This I believe to this day gave me shares that over a very long period would have yielded good results, but given a maximum of 10% in a year does not seem that attractive when it can be attained on a good day. So long story short, I sold all of my holdings and opened a Covered Warrant trading account - which offers me the ability to trade in a leveraged manner so 1% change in the underlying gives me say 10% profit - or most importantly loss.
The things I have learned in a nutshell are this (not necessarily in this order):
- Don't bother trading stocks unless you want to invest
- Don't get involved with retail stocks/deritatives unless you know the exact price direction
- Trade an indice - you might as well - all the stocks move in exactly the same direction anyway - plus there is much more commentary on an indice
- Do listen to commentary, although only slightly - most of the time it just clouds judgement -although I'm still working on beating this one
- I trade technically - meaning that I use chart patterns to guide my trades.
- Fundamentals don't mean anything in short term trading.
- Don't believe technical indicators can predict the future. Their only use is to make you think that you could have. They are all derivations based on price action so therefore make this you primary consideration.
I will build on these throughout by journal. The main function of this journal is:
1. To state clearly my own ideas for future reference.
2. To teach others the thought process that may be useful for trading.
3. To prevent the loss of thousands of pounds which the experience I have has cost me so far.
I wish to say at the outset that a good book to buy after you have a good understanding of investing and technical analysis is that of The Master Swing Trader by Farley. This book offers invaluable insight for the short term or Swing Trader and is the basis for most of my wisdom - albeit mixed in with some experience.
I trade the FTSE100 index and do so using leveraged covered warrants. I chose my trades based on charts in as many time dimensions as possible. Start with the weekly chart, then the daily chart and then look to 60-minute charts. I have gone through all holding periods to try to find the best profit. Swing trading can be ambigious and so it can be difficult to find the right holding period. I have even tried day trading - but have found that the markets have too much of an upper hand in this situation. It is still possible to trade but is left more to luck. The best advice I can give is to look at all the charts that I mentioned above and identify support and resistance levels in each. This can be quite tricky but try to link obvious highs and lows - don't get overly complicated. Then, when you find a pattern of price ranges, trade this pattern, using primarily that chart.
Welcome to my journal. This is the first entry in which I will explain some basic principles I follow, as well as what I have learned up to this point.
If anyone wants to contact me regarding anything in this journal I would welcome mail to:
[email protected]
I started trading in about October last year. Initially I started by buying a number of shares of different companies, hoping that the value of those shares would increase over time. I did not have a great deal of experience, but I had read alot of literature on the subject and watched alot of CNBC, so I was not starting as a complete novice. I initially chose my companies to invest in using resources like Investor's Chronicle and the broker recommendations. This I believe to this day gave me shares that over a very long period would have yielded good results, but given a maximum of 10% in a year does not seem that attractive when it can be attained on a good day. So long story short, I sold all of my holdings and opened a Covered Warrant trading account - which offers me the ability to trade in a leveraged manner so 1% change in the underlying gives me say 10% profit - or most importantly loss.
The things I have learned in a nutshell are this (not necessarily in this order):
- Don't bother trading stocks unless you want to invest
- Don't get involved with retail stocks/deritatives unless you know the exact price direction
- Trade an indice - you might as well - all the stocks move in exactly the same direction anyway - plus there is much more commentary on an indice
- Do listen to commentary, although only slightly - most of the time it just clouds judgement -although I'm still working on beating this one
- I trade technically - meaning that I use chart patterns to guide my trades.
- Fundamentals don't mean anything in short term trading.
- Don't believe technical indicators can predict the future. Their only use is to make you think that you could have. They are all derivations based on price action so therefore make this you primary consideration.
I will build on these throughout by journal. The main function of this journal is:
1. To state clearly my own ideas for future reference.
2. To teach others the thought process that may be useful for trading.
3. To prevent the loss of thousands of pounds which the experience I have has cost me so far.
I wish to say at the outset that a good book to buy after you have a good understanding of investing and technical analysis is that of The Master Swing Trader by Farley. This book offers invaluable insight for the short term or Swing Trader and is the basis for most of my wisdom - albeit mixed in with some experience.
I trade the FTSE100 index and do so using leveraged covered warrants. I chose my trades based on charts in as many time dimensions as possible. Start with the weekly chart, then the daily chart and then look to 60-minute charts. I have gone through all holding periods to try to find the best profit. Swing trading can be ambigious and so it can be difficult to find the right holding period. I have even tried day trading - but have found that the markets have too much of an upper hand in this situation. It is still possible to trade but is left more to luck. The best advice I can give is to look at all the charts that I mentioned above and identify support and resistance levels in each. This can be quite tricky but try to link obvious highs and lows - don't get overly complicated. Then, when you find a pattern of price ranges, trade this pattern, using primarily that chart.
