The Basics of Trading

This is a discussion on The Basics of Trading within the First Steps forums, part of the Reception category; ... hi ALL!! For i.e my case: I pretend to start w/ £1200 account next week , this just in ...

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Old Mar 18, 2003, 7:46pm   #196
 
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... hi ALL!!

For i.e my case:
I pretend to start w/ £1200 account next week , this just in terms of shares capital. because before there was the
investment in books, computer, broadband connection, this because the data and the research I am using is all free , advfn, yahoo,forums so at least this put me in the level of minimum at £2000 which you can say is quite an expensive "game" to get into when you still are a beginner and know there is sharks we talking about, who's going to play against us...
So if I keep following the advice I will start with a trade of 10%=£120 where I will never gonna risk more then 3% max per trade , in terms of capital (and this supposing the co. which you invest don't go bust like i.e enron) in this some trade =£4 so like this will give me a very small margin for movements in share price without triggering a stop order?
Until where we should follow the "rules ?
The potential for a good growth is very gloomy at least in terms of capital returns...so more and more I get to a conclusion at least for the next 3/4 years I will not be prepared to make a change for be a permanent trader, this not talking just about capital wise, for mainly in terms of trading knowledge , confidence and analysis of the markets news and acting in conform, so .... it's a long and painfully process all of this trading for a living...
maybe I have the wrong leads, I mean instead of investing everthing ( all the capital) in one share try to diverse your portofolio in different sectors and notr start with all the "comforts" in terms of resources otherwise the cost will shoot up and you will go bust very quick !!! maybe I am wrongly starting my trading business, but for now I just can see it a Little like a profitable Hobie if I learn it properly...
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Old Mar 19, 2003, 9:42am   #197
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Hi esiotrot (Peter G)

I’m interested in a couple of the posts between Helen and TBS re: Options, especially the following bit:-


Quote:
quote:
--------------------------------------------------------------------------------
Originally posted by Helenqu
I think Options are way too complicated for a beginner. Not only have you got the chart stuff but you also have the added time factor and all the silly language that goes with it. KISS.
--------------------------------------------------------------------------------

and TBS replied

Have you actually spent any time looking at them?

It is only a suggestion that springs immediately to mind given the time constraints that NI has. The languabe is a lot eaier than some of the flowery 'swing' trading set-ups.

Better to leave no avenue un-explored at this point.

This last sentence has me intrigued and IF / WHEN you have the time – and energy - any input would be greatfully received.

Cheers
Andrew
(SoldierofOne)
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Old Mar 21, 2003, 5:14pm   #198
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Hi all
Wow!! You guys sure do post a lot of info. It’s taken me hours to read through that lot. I’m sorry I did not pick up on this thread when it opened.

OK – I think I understand at least the recent stuff on this thread.
Also OK –I’ll hold my hand up and say: “It’s a fair cop – I trade Options” Or maybe to be more precise I trade UK stock Options. I do not trade index options or US Options. Neither do I write (sell) Stock or Index Options

Let me ask a question – do you need to know in detail how an internal combustion engine works to drive a car?? Answer – no, you just jump in and drive. Some people become “car bores” and can tell you everything about the double overhead cams and valve seats and all that nonsense (sorry guys). Maybe Helen has met too many “Option Bores”.

Several points worth making about the original post from NI and probably the most important reply is FB about time frames. I probably spend less than 20 minutes a day at my PC and perhaps an hour at weekends. This is specifically looking at EOD charts for UK stock options. I believe everything is in the price. My charts show bars, volume and Bollinger bands. I use trendlines and support and resistance levels. When I first started TA I used every indicator under the sun thinking that more is better. Then I spent time looking for the perfect indicator. Now I rarely use any indicators at all. If I look at any it would be ma’s (flexible trendlines), MACD or RSI.

Options can be as simple or as complicated as you what to make them. If you want to get down to the nitty gritty then of course there’s details you must understand but so there is with anything else. Using TA and trying to establish direction and likely targets for a limited number of stocks does not take long. You do not need the “Greeks” or any of the other complications often associated with Options. You do need to be AWARE of the relative movement of the option price as the underlying stock moves but the main item of attention is the stock price because if the stock is moving in the right direction then the option probably is too. I use Mytrack and you get Option Information for free with the basic service.

Time decay is also a reason to be nervous as expiry approaches but normal caution should keep you out at this point.

With an Option contract equivalent to 1000 shares I am usually looking at £5 to £10 per point movement. I use Options as my trading vehicle because of the leverage, I’m using an option costing me say £200 as a surrogate for stock worth around £2000 or more.

At the end of the day all trading involves making the choice between BUY/SELL/DO NOTHING.

Whether you could make a big income from small capital is another question and I suspect the answer is NO. However trading Options using EOD data is a fairly relaxed way of trading for real money while learning basic TA skills with limited time available.

Early in this thread FTSEbeater put up some stocks to discuss re:targets etc perhaps it might be of assistance to repeat this exercise and in addition try to get an idea of how the stock might be traded as an Option. Or maybe that’s getting away from the purpose of this thread and should go somewhere else??
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Old Mar 21, 2003, 6:28pm   #199
 
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FTSE Beater started this thread Hi Esiotrot

I'll put up some more charts to discuss tomorrow.
If you could do options trading as a new thread - that would be brilliant.

Thanks
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Old Mar 21, 2003, 6:37pm   #200
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You will have to make sure that the charts you use have options available - probably different for spreadbetting rather than the 'real' world - which is why most UK options traders use US options as UK ones are rarely worth it (ihmo) other than on the indices.

Here is a list of the UK shares that have mainstream options:

http://www.theblindsquirrel.com/pages/lifopt.htm

Here is a link to the 'European style' UK index options:

http://www.liffe-data.com/PricesPage...px?t=OESX/O.LI

.. and the 'American style' UK index options:

http://www.liffe-data.com/PricesPage...px?t=OSEI/O.LI

I'll have a look over the thread over the w/end to see if I have anything to add - been a bit busy over the past few days.
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Old Mar 22, 2003, 12:48pm   #201
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Hi TBS
You are dead right about the UK stocks and what makes matters worse is that of the approx. 90 stocks which have options associated with them, a large number are pretty useless.
Various reasons: small number of options in circulation (open interest) and hopeless charts are the two main ones.

However once you have eliminated the useless ones, the ones left - around 25 perhaps do have some merit for a trader with very limited time. The problem that now raises itself is that trading opportunities don't come along very often and I spend a lot of time sitting on my hands. This is the reason, I guess, that most professional Option traders go to the US market where there are a v large number of Option Stocks.

Just as a side issue; where can you go to download daily EOD data for US stocks? Plus historical data? I probably should know this but I don't.
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Old Mar 22, 2003, 2:46pm   #202
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Hi esiotrot,

We (TBSL) only trade about 6 UK options (other than indices options)

Off the top of my head:

IMT
BSY
RBOS
BARC
RIO
GSK

There are probably a couple of others. Most of our options trading is in US stocks, with the occasional European thrown in for fun! - but then we only sell options.

I'm not sure where you would get US EOD historical data, get hold of Helen or JT they will probably be able to point you in the right direction
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Old Mar 22, 2003, 2:58pm   #203
 
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Hi Peter,

I think you might find what you want here at a price:
http://www.downloadquotes.com/en/

You might find that a Bronze sub to Mytrack $5 or so a month will also give you what you want.

(PS - I want to make it plain that YOUR Options presentation was very clear )
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Old Mar 26, 2003, 8:27pm   #204
 
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What happens when discipline fails?

FTSE Beater started this thread Hi all

I have mentioned a number of times that you DON’T move a stop-loss to increase risk, and I wanted to go through the “what if” scenario of letting a stop run.

We’ll take this example from Barclays back in Early January.


Click the image to open in full size.

Here we have a nice double or triple bottom on support, and a clean bounce up. You take this long entry with a tight manual stop at 360.
This is happens over the days to come


Click the image to open in full size.

Brilliant, straight into profit and looking good
The following week isn’t so promising though


Click the image to open in full size.

You hear yourself saying

Quote:
Ok the price has gone through support, but it’s ok, it closed above support so it’ll be ok
So you leave it for a bit, and this happens


Click the image to open in full size.

Quote:
Oh no the price has gone through support, ok it’s too late to sell now, I’ll wait until price gets back up to the support line.

Click the image to open in full size.

Quote:
Now price has made a nice rounded bottom so the next move is up, I can let it run for a while longer as it’s bound to go through the resistance level
and the next thing you know price does this.


Click the image to open in full size.

Quote:
Time to sell out and except the loss
Well it’s good to know you cut the loss – some 35 points or 10% below where you should have done.

It’s very easily done this, and I’m sure most traders have done this at some point in their trading career. This is why discipline is such a large part of trading. Always remember to move a stop to protect profits NOT to increase risk.


It’s about time I did some imaginary trades, so here goes:

Your in the following trades

<table border="1"> <tr><td>No.</td><td>Ticker</td><td>Name</td><td>Long/Short</td><td>www.ADVFN.com Link</td></tr> <tr><td>1</td><td>BARC</td><td>Barclays</td><td>Long</td><td>http://www.advfn.com/cmn/chrt/chrt_w...nd1_3=&ind2_3=</td></tr> <tr><td>2</td><td>DXNS</td><td>Dixons </td><td>Short</td><td> http://www.advfn.com/cmn/chrt/chrt_w...nd1_3=&ind2_3=</td></tr> <tr><td>3</td><td>MKS</td><td>Marks & Spencer</td><td>Short</td><td> http://www.advfn.com/cmn/chrt/chrt_w...nd1_3=&ind2_3= </td></tr> <tr><td>4</td><td>OML</td><td>Old Mutual</td><td>Short</td><td> http://www.advfn.com/cmn/chrt/chrt_w...nd1_3=&ind2_3=</td></tr> <tr><td>5</td><td>TSCO</td><td>Tesco</td><td>Long</td><td>http://www.advfn.com/cmn/chrt/chrt_w...nd1_3=&ind2_3=</td></tr> </table>

Same as before, give targets and stop-losses as well as risk / reward calculations. Looking at 6 month charts, which won’t be easy with the current war situation

As always there is no right or wrong answers and I would love to hear from you.

Take care,
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Old Mar 26, 2003, 9:09pm   #205
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or you say ..hit obvious resistance at 410 and failed - sell
or
when it gets to 360 agaon.. 4th time it will fail and sell.

Those are BASIC TA rules..
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Old Mar 26, 2003, 10:35pm   #206
 
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FTSE Beater started this thread Hi Madasafish

You are right of course, but when greed takes over - it throws out all logic
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Old Mar 27, 2003, 8:41am   #207
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FTSE I thought you traded indices.. that should have taught you better:-)
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Old Mar 31, 2003, 10:47am   #208
 
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Hi FB

Right, so I've opend my big mouth, now time to change feet

Nice post BTW.

BARC (I know round figures shouldn't be used, but there you go )
Enter long 378
Target 480
Stop 240
R/R 2.7

DXNS
This is a tight one and I wouldn't trade this other than on intraday with a v. good data feed and charting s/w, but:
Enter short 88
Target 80
Stop 90 (support turning to resistance)
R/R 4 (nice but you gotta watch this one carefully)

MKS
Enter short 286
Target 260
Stop 293
R/R 3.71

OML
Bit of a dicey one this for me
Enter short 75 There is support at 78, 77,and 76
Target 69
Stop 77
R/R 3

TSCO
Enter long 192
Target 208 (but watching this as it could be 230 slightly longer term)
Stop 185
R/R 2.29


Love to hear your feedback

Cheers
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Old Apr 1, 2003, 9:21pm   #209
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Hi FTSE Beater and NastyItch
Hope you are both well. FWIW, here are my observations on the above charts (and so as not to be influenced by NI (!) I’ve not looked at his post…)
Prices as of close today

Barclays
Following a failed inverse h+s, I can now see a rising neckline inverse h+s
Long @ 373p
Target 410p
SL 360p
R/R 2.8

Dixons
Trendline is down here; big gap in early Jan
Short @ 85.5p
Target 70p
SL 100p
R/R 1.1

M&S
Looks like now in a continuation trend. Already seen one breakout of this pattern and more likely to see another (‘the trend is your friend’)
Short @ 284p
Target 275p
SL 300p
R/R 0.6 (perhaps not a trade at the moment)

Old Mutual
mmm…bit tricky. Frankly, not much idea here
if breach 83p, long with target of 87. SL of 80p. R/R 1.3
if breach 78p, short with target of 71. SL of 80p. R/R 3.5

Tesco
Looks like a flag and the chart is pausing for breath.
Long @ 176p
Target 205p
SL 170p
R/R 4.8

Cheers

SoldierofOne
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Old Apr 1, 2003, 9:42pm   #210
Joined Jan 2003
Hi NI
Just checked with your post…we seem to have called the charts in the same direction (!?!) but you are definitely more aggressive than me on Barclays and M&S; this may be a function of time between analysis perhaps.

Out of curiosity, what is your thinking for a target of 480p for BARC?

mmm...<thinking mode>... On my rising neckline (or am I seeing things?), I was thinking of seeing if it was tested first; if there was a breakout upwards at this point then I would employ a rising stop loss (c 410p) and look for the 480p figure...

Cheers

SoldierofOne
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