The Basics of Trading

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,

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

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.

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.

fingers crossed (I think I CRACKED it)

colours are CR*P (I can cancel the WHIZZ KID now (lol)

Hello everybody, particularly Paul and Jonny T

I think your Risk/Reward calculation is a bit misleading. The obvious inference is that you can improve the ratio by either reducing your stop loss or increasing your target price. Either of these could result in disaster. A better way of looking at risk and reward is to include some assessment of the probability of the SL being breached and of the target being reached.

For example, you might conclude that, based on the figures you mentioned, the probability of 820p being breached was 20%, but increasing the SL to 850 would increase the probability to 50%. Similarly, it seems logical to assume that the higher you set your target price, the lower the probability of achieving that figure. At the price quoted by Paul (862p) you might assess that the probability of reaching 900p was 75%, but that would decline as the target price increased. You might conclude that the probability of reaching 1080 within a reasonable timescale was only 35%. This would give (for want of a better term) a Probability Ratio of 35/25 or 1.4.

In the figures I have given, the Probability Ratio for a target price of 900p with a SL of 820 (ie a small, quick profit) would be 3.75. If the SL was reduced to 850 the Probability Ratio would give a negative for a target of 1080 and a ratio of 1.5 for a target of 900p.

This approach gives a more realistic assessment of the risk involved, but does require an estimate of probability for the target and SL.

I put this suggestion forward for discussion.


John

Hi John,

Surely this depends on timescale?

I wasn't looking at a day or swing trade, more an intermediate trade.

I stand bu my guns.

As Bush is saying to Saddam