The Basics of Trading

This is a discussion on The Basics of Trading within the First Steps forums, part of the Reception category; Here is my input to see if it might help. The UK market shuts at about 4.30pm and it has ...

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Old Feb 22, 2003, 8:24am   #89
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Here is my input to see if it might help.

The UK market shuts at about 4.30pm and it has a natural tendency to see what the US is doing in the afternoon and copy it.However the US market continues to trade until 9pm gmt and many strong moves can happen in the last section of the US day only to be reflected by market makers when the UK opens the next day.This can make it quite difficult for UK traders to hold positions over night.

The basics of trading can be used on any market, many feel that its worth looking at the US because its a leader and not a follower.We only make money if a stock moves and one market where this is very prevalent is the Nasdaq market.An electronic market that can be traded from anyones pc anywhere in the world.A market that has big names like Microsoft and Intel amongst its leading companies.

I enclose a chart of a large Nasdaq stock and you will see that it moves over 100% from October into November.

Where can you view the charts for these companies?There is a company like Sharescope that gives end of day data. I enclose a sample of their charting package that costs about $29/month.
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Old Feb 22, 2003, 11:26am   #90
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For anyone contemplating trading the US, TC2000 is a great value package for $29 (about £20) per month. You can easily pay that just for data with other packages, and it contains some great screening tools. If you send off for the CD, its free, and you can play with it as long as you like. It only starts to cost once you activate your account to update the data - so you can play with the full range of shares/indices using the historic data on the CD rather than a watered down version as is the case with many other packages.

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Old Feb 22, 2003, 11:48am   #91
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You are so right about bad news at the end of the tunnel. I've had my fair share in the last few weeks (not trading related).

Naz and RogerM. Thanks for the tip re TC2000. I will shortly be needing this sort of s/w and data once I get my head around a few more concepts and lots more paper practice.

FTSEBeater keep them lessons coming
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Old Feb 22, 2003, 12:30pm   #92
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Setting Price Targets

FTSE Beater started this thread Hi all

Thank you to iSquared for giving me the idea to do this.

Weíve already covered stop-loss setting and risk / reward analysis. The other part is of course price targets.

Your price target (as with the stop-loss) is governed by the time scale your trading in and how long you expect to hold the shares.

Click the image to open in full size.

This ALLD has 3 levels of resistance

322 Ė January support
363 Ė October and December Support
420 Ė High of January and also resistance in early September and back further.

The Short term target is 322, which as I say is the January Support. Itís the short-term target for 2 reasons, 1) Itís the closest to the current price and 2) Itís enough resistance to hold it on a short-term basis (the resistance was only valid for a week), and for a short-term trade, we would expect it to get there pretty quickly.

The Medium term target of 363 would take longer to get to than the short-term target, but thatís what you would expect. For 363 to be hit, it will have to take out 322 and although you would expect price to stop there, it wouldnít hold it back long enough to be a problem.

The Long term target will have to get through both the short-term and medium-term resistance, but as were prepared to hold it in the portfolio for a while, that is not a problem.

Target setting comes down to how strong you think support and resistance is at the various stages. The text books say that the more often a level is tested and the longer the period it is tested over, the stronger it becomes. As Mr.Charts has pointed out in another thread, this isnít strictly the case for there are complex reasons why it doesnít always work, but as a guide I think itís reasonable to assume the longer a support / resistance level holds the stronger it is.

Choosing how long your going to hold shares for, is a very individual thing and take many years to figure out what suits you best. Having an idea of how long your planning to hold your shares though should decide your target.

That is pretty much it for target setting. The only other thing to realise is that changing the target is no different to changing a stop-loss. There must be good reasons for doing it and it can be adjusted as time goes on and the chart develops. Just remember that a stop-loss MUST NOT be changed to add risk, but to protect profits where suitable.

For this week, Iím going to throw it open for you to analyse any share / index etc you like. Ideally a chart with movement and reasonable volume (so FTSE 100 companies). The chart can have multiple resistance / support points, and an idea of how long your planning on holding the instrument for is a good idea. On the same chart you can write in (as I have done with the ALLD one) the short, meduim and long term targets.

I look forward to seeing which charts you choose. If you need a hand posting up a chart, then this thread should help. If not then you can always contact me.

Take care
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Old Feb 22, 2003, 5:27pm   #93
Joined Nov 2001
Hi All,

I have never been able to interpret volume successfully. To the point where I do not use it these days. I read in the Feb SFO (an interesting read, by the way) that a spike accompanied by high volume was a good indication that the market was telling me to sell (it was a buying spike). I have taken advantage of the charts on this thread to look at the spikes. They all reversed with good selling opportunities but the volume on all the ones that I examined were low- some very low.

I have seen the market rising with high, medium and low volume.
Falling with high, medium and low volume.
Peaking and bottoming with high, medium and low volume.

Divergence does not help me, either. The market seems to peak in volume halfway up the rise. A student of volume theory could get a signal on the next peak with lower volume, only to see one or two more peaks with even lower volume before the reverse finally comes.

Any comments welcome, please.

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Old Feb 22, 2003, 5:53pm   #94
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I have never been able to interpret volume successfully. To the point where I do not use it these days.
I have seen the market rising with high, medium and low volume.
Falling with high, medium and low volume.
Peaking and bottoming with high, medium and low volume.
I use volume a lot as a confirming signal for a break of support or resistance. Its especially useful for breaks out of a rangebound situation. If you think about the logic, then the following should apply:

If a break of S/R occurs on low volume, the likilihood that its a false breakout must be higher - simply because the energy behind the move as shown by the volume figure is poor. Even a large move will often fall back just as quickly under these conditions. Conversely, high volume suggest a stronger momentum which is more likely to carry matters beyond that level.

However, a breakout on low volume will sometimes succeed, so what is needed in order to enter the market is a further confirming signal. I tend to require at least one close above the s/r level before committing myself. Two if i think more caution is need.

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Old Feb 22, 2003, 8:31pm   #95
Joined Nov 2001
Originally posted by Les Carlin

If you think about the logic,
Hi Les,

I agree that volume should be a good clue because, like the actual price, it is real time. Everything else is historical, unless you use number of trades, open positions, etc.

I'll use your argument tomorrow to go over my Sierra charts and I may see some light.

Thanks Split
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Old Feb 22, 2003, 10:57pm   #96
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Volume is a tricky subject! Maybe our resident expert Skim will respond, albeit wrt ES Futures only. I find that it can be deceptive to try and use it to trade. If you use it as a confirmation tool, you will likely do better. I think in a "true" situation, i.e. one that is not being manipulated by the MM's, there are clear cut signs.
Example. watching closely on the ES futures 1 min. you often see the volume slowly dry up from 1500/min down to one or two hundred/min ( doesn't matter if it's up or down ticks or mixture) This invariable leads to a decent move on the price. Getting the direction right is another matter. ES Futs. also respond to divergent volume peaks.- See my ES vol charts.
Hope this helps.
The views expressed here are my personal views and for your information only. Any expression of likely movement of a share is merely guesswork and is to be treated as such.This information must NOT be used as a basis for making any investment decision.
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