The Basics of Trading

This is a discussion on The Basics of Trading within the First Steps forums, part of the Reception category; Hi NastyItch. Thank you very much for your post, it gives me an idea of who is reading and what ...

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Old Feb 21, 2003, 9:13am   #85
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FTSE Beater started this thread Hi NastyItch.

Thank you very much for your post, it gives me an idea of who is reading and what issues need tackling.

I'm sorry for not explaining the terms better, and from now on I will make sure I do so. In the mean time, these are the terms you were asking about.

Risk/Reward - The risk is the amount your prepared to lose. The Reward is the reward you expect to get if the trade goes your way. If you then divide the Reward by the Risk you end up with a RR or Reward/Risk ratio - It's mainly used to get your mind to see if the trade your entering into carries to much risk for the reward, in which case the trade shouldn't be traded. After all you wouldn't buy a car that had mechanical problems as the risk of it breaking down is too high.

Protective stop - This is linked to a stop-loss. The stop-loss is there to say if the price goes against me this much then "I'll get out - It's already cost me too much" - The protective stop is normally set a long way from the price and is used as an Emergency stop loss to protect against big disasters. For one reason or another, it's really not worth having a protective stop - but a Stop-loss is vital!!!

cup and handle - This is a charting pattern. The best explanation I found is
This is what the pattern looks like
Click the image to open in full size..
It really is an advanced pattern and something I might cover later on.

Hope this Helps
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Old Feb 21, 2003, 10:06am   #86
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Thanks FB

It all helps, and starts to tie in with stuff I'm reading in Murphy.

Ta also to RogerM and Skimbleshanks for their explanations. I always wondered what longs and shorts meant (other than the one covers the other on my legs) I SEE SOME LIGHT, FAINT BUT APPROACHING!!!

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Old Feb 21, 2003, 10:17am   #87
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Beware the light at the end of the tunnel.............. It could be someone bringing bad news...
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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Old Feb 21, 2003, 10:21am   #88
Joined Feb 2002
Thanks again to every one that replied to my question Re "COVER".
At first I thought it was a stupid question and sat on it for some time.Hope it helped others to understand the meaning of COVER.


I thought your explanation was exelent.I never really understood how covering shorts produced a bear squeeze etc .

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Old Feb 22, 2003, 7:24am   #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, 10:26am   #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, 10:48am   #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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