The Basics of Trading

This is a discussion on The Basics of Trading within the First Steps forums, part of the Reception category; Hi Paul102 This is brilliant. I was thinking it was going to take me ages to think up the lessons ...

Reply
 
LinkBack Thread Tools Search this Thread
Old Jan 28, 2003, 9:25am   #11
 
FTSE Beater's Avatar
Joined Feb 2002
FTSE Beater started this thread Hi Paul102

This is brilliant. I was thinking it was going to take me ages to think up the lessons for the weeks ahead, but it looks like you've planned them for me

I'll put my analysis up tonight
FTSE Beater is offline   Reply With Quote
Old Jan 28, 2003, 10:13am   #12
The Staff are paid members that perform various roles such as editorial, advertising, support or technical work.
 
Trader333's Avatar
Joined Jan 2003
Risk Reward Ratio

Hi All,

I hope that you dont mind me contributing to this discussion. For risk reward ratio another factor that is critically important is "Percentage of successful trades"

For example
1) If you have a trading system or method that gives you a 50% success rate and

2) You get a 2:1 reward to risk (ie. for every trade you win you make 4 points whereas for every trade you lose you lose 2 points) and

3) You trade the FTSE 100 future at £10 per point

Then, on average, for every 10 trades you make you will have the following scenario

(10 trades) x (50%win) x (4 points x £10) - (10 trades) x (50% lose) x (2 points x £10) = £100 profit

But if your percentage of successful trades drops by just 10% to 40% the picture changes as follows:

(10 trades) x (40%win) x (4 points x £10) - (10 trades) x (60% lose) x (2 points x £10) = £40 profit

A very different picture and if your percentage of successful trades drops to 30% then this would change to a loss of £20

This is why I think that backtesting systems over a long period is important as it will give you a more accurate percentage of successful trades that you can expect to achieve and as such adjust your targetted reward to risk ratio.

Just a thought


Paul
Trader333 is offline   Reply With Quote
Old Jan 28, 2003, 10:48am   #13
Joined Feb 2002
Bill G
Thanks Bill I am looking for some chart examples like the one you posted to get the hang of risk reward entry to trade.Your chart shows a pull back to 870 with a risk of 50 points to 820 and a reward of 70 points. Have I got it correct ?.
What do you mean by candlestick to print.?
__________________
fluke
Fluke is offline   Reply With Quote
Old Jan 28, 2003, 2:38pm   #14
 
Bill G's Avatar
Joined Mar 2002
Fluke
Are you referring to the support of 820 set at 11 Dec? I think a more genuine support would be 853 as shown by the P&F chart .
920 would be my resistance.
The clear candle is a long open bull type candle `print` (showing up on the chart)
Hope this is a bit more clear.
Bill
Attached Thumbnails
aal-pf.gif  
__________________
Bill G
Bill G is offline   Reply With Quote
Old Jan 28, 2003, 9:00pm   #15
Joined Feb 2002
Bill G
Thanks for reply.I am trying to learn the art of opening a trade using the risk reward ratio I have read about on this site.I will try to explain what im after.Im using Sharescope EOD charts and want to open a trade after the chart has reversed down from an upward move .Lets say its come back 70% of the up move and I am looking to trade at this point. This would put the price 30% above a double bottom,therefore could i undarstand going long would give me a 30% risk (to a double bottom) and a 70% reward back up again to the previouse resistance. Am I correct in saying this will give 70% reward and 30% risk.
Hope this makes sense
__________________
fluke
Fluke is offline   Reply With Quote
Old Jan 28, 2003, 10:19pm   #16
 
FTSE Beater's Avatar
Joined Feb 2002
AAL Chart

FTSE Beater started this thread Hi all

Well this is my analysis of it.

Click the image to open in full size.

The main thing that everyone picked up on was the long term trendline from early August to mid December and on onwards. The trendline / resistance was less obvious, but still valid if price reaches that point.

If I was looking solely at the chart (and I had no idea of what was happening in the world), then I would have looked for a bounce off the trendline, with a stop just below the trendline. The target would be the sloping trendline at the top of the chart.

Would I have traded this? - No. The only reason is that at the moment the markets are very unsteady and going long in this market carries a high risk. In calmer times I would have taken the trade.


Hi Techcherry. Well done on spotting the long-term trendline. I'm not sure that 930 is a valid resistance point. Mainly because the price went either side of that line without stopping. The only other thing I would say is that the red down trendline, I would only draw on a 60 minute chart. End of day charts, should represent longer term movements, but that would have been a great downtrend on a 60 minute chart.


Hi Paul102. I loved the way that you kept the chart simple, which is a good thing, as it focuses the mind on what’s important. The top trendline that you’ve drawn did get pierced in December, but the later test of the trendline in January held strong so that is a good trendline and well spotted. I probably wouldn’t want to see 862 broken, but if the price pierces 862 and then quickly reverses, then yes that would make a good entry.


Hi Bill G. The award for the most colourful chart goes to you – I didn’t know that Sharescope’s colours went that bright . Anyway, I like the resistance point at 940, that makes for a good target if it can get that high. I presume the dotted lines, are the partial trend lines that Sharescope draws in. I can never get those things to work, I find them too subjective and unreliable at best, but it does show how well it has been trending over the last 6 months.


Hi Fluke. Yes you are correct with regards the risk and reward calculations. I will hopefully later on this week be posting a thread on risk / reward and how it all fits in.


Thanks to everyone who has posted their charts, and if anyone still wants to post there thoughts on the AAL chart, please feel free.
FTSE Beater is offline   Reply With Quote
Old Jan 28, 2003, 11:03pm   #17
 
be-positive's Avatar
Joined Dec 2002
Great to see members posting their charts, all thanks to your good self FTSE/B ,as you will know I posted my effort on the other thread and screwed it up with my chart (to wide) as I have a 19" screen could this be the problem ??? (dont no how to reduce chart to fit )HELP
be-positive is offline   Reply With Quote
Old Jan 28, 2003, 11:33pm   #18
The Staff are paid members that perform various roles such as editorial, advertising, support or technical work.
 
Trader333's Avatar
Joined Jan 2003
Screen Size

Be Positive,

Your 19" monitor has nothing to do with posting of chart problems. There are a number of programs available such as Paintshop Pro that, once you have saved a file, allow you to change the size to whatever you may need to post on T2W. You may even have them on your computer already and it may be worth having a chat with someone local to yourself who could help.

All The Best


Paul
Trader333 is offline   Reply With Quote
Old Jan 29, 2003, 12:02am   #19
 
paul102's Avatar
 
5 Posts
Joined Jan 2003
Hi,

Just a quick thanks to everybody who posted their charts and esp. FTSE Beater for his efforts. It is v. educational reading other peoples ideas.

Looking forward to the next one,

Paul.
paul102 is offline   Reply With Quote
Old Jan 29, 2003, 12:35am   #20
 
be-positive's Avatar
Joined Dec 2002
Thanks trader 333 I have taken your advice and asked the WHIZZ KID from next door to come and help the PLONKER who is typing this message.
be-positive is offline   Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Similar Threads
Thread Thread Starter Forum Replies Last Post
Article: Basics of Trading: Part 1 T2W Bot Educational Resources 32 Feb 9, 2013 12:09am
Article: Basics of Trading: Part 3 T2W Bot Educational Resources 13 Oct 21, 2012 2:26pm
Best Thread: The Basics of Trading FTSE Beater First Steps 360 Mar 23, 2011 1:37pm
Article: The Basics of Trading:Part 2 T2W Bot Educational Resources 8 Feb 17, 2005 12:09am

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)