The Basics of Trading

This is a discussion on The Basics of Trading within the First Steps forums, part of the Reception category; FTSEB LOOKED AT SHARESCOPE CHART AND SUGGEST SHORTING AT 114.WITH STOP AT 118 AND TARGET OF 92 .RISK 4 POINTS ...

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Old Feb 2, 2003, 7:26pm   #33
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FTSEB
LOOKED AT SHARESCOPE CHART AND SUGGEST SHORTING AT 114.WITH STOP AT 118 AND TARGET OF 92 .RISK 4 POINTS AND REWARD 22 POINTS. .CHART IS IN DOWN TREND THATS WY I SUGGESTED SHORTING IT.
WHAT DO YOU THINK ?.

PS WOULD YOU BELIEVE IN JULY 98 THIS WAS PRICED AT £6.99.
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Old Feb 2, 2003, 7:40pm   #34
 
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I'd be looking for some short term strength...

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Old Feb 2, 2003, 7:53pm   #35
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JonnyT.
I have read some of you other threads and do respect your advice.Not sure what you mean,have i gone the wrong way .Should i consider going long. If so what Risk and Rewardpoints would you use.Im very keen to learn and understand this method,so I will welcome any help on this subject
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Old Feb 2, 2003, 8:06pm   #36
 
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Hi Fluke,

It has had a very steep downward movement. I expect a bounce of decent magnitute soon.

I certainly wouldn't short at the current price.

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Old Feb 2, 2003, 8:20pm   #37
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JonnyT.

Thanks M8 I would rather make my mistakes here than for real.
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Old Feb 2, 2003, 8:57pm   #38
 
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Excellent post FB. Many a trader has fallen foul of this. The thing is some traders do not relate it to actually trading which is fatal imo.

For all you newbies, I suggest you ensure the above post is understood, and if not, read it again or ask further questions. Do not take the attitude of it being a 'tweaking technique' for attaining profits. It is a fundamental aspect of trading and if you cannot control it -

DO NOT TRADE
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Old Feb 2, 2003, 9:55pm   #39
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Can we please continue with this Risk Reward subject,I would like to see more chart examples showing points on a chart of buying,placing, stop and target.I have just woken up to the fact that this is one of the most important rules to stop me making more loss making trades than winners.Thanks again to JonnyT and Splurge,I have read other articles on this but it didnt sink in until I read the last threads. Very keen to learn more of this .
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Old Feb 2, 2003, 10:44pm   #40
 
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Here's my take on BAY. I haven't done TA on EOD stocks for a long time so don't take this as gospel, but follow the reasoning..... Firstly, one of the powerful TA formations is Negative or Posative Divergence- go look this up in the archives if you don't undertand the terminology.
Secondly, there is a rule that says 'history repeats itself, and each instrument has it's own characteristics'.
So here we have BAY showing Positive divergence in the price. NOW go back in time and see if the price responded in the past to Positive divergence. Answer, yes it did on at least one occaision.- Around Nov 1999 - look back further at your leasure. Notice also there was a responce to Positve Divergence in July 2000.
OK so now we have that bit done. We can assume that the price is now more likely to go up than it is to go down ( Is that a wise assumption in this climate?). OK let's go long, but what about the R/R? The risk is a drop below 100, so that's 14p. Give yourself some breathing space so say 95p....19 p away from 114p. The reward is , worst case, is 141p- downtrend resistance. You CAN'T assume the price will go beyond this value. That's a reward of 27p. So the R/R is 1.5. That's just no good at all , especially as you have a potential BIG drawdown of more than 10% to get to support.
Now here's the crunch. Patience.Why not put it on your "watch list" for a price of 145p? There is a triangle formation that may break to the upside through 150p. At this point we have a viable trade. The risk will be the value of the downtrend resistance line, which after the breakout will become support! This will be in the order of 140p. The reward will be around 190p, horizontal resistance, as drawn. This gives a R/R of 4:1. 10p down , 40p up.
You may think this is tedious, but it will win hands down over the "pin the tail on the Donkey"
An alternative possibility. Go long now, on the basis that the price IS at support, on a minor uptrend. Stop at 105p R/R is 2.5 :1. Not my cup of tea .)
If you didn't read it, take a look at my Dow analysis on Friday under Indicies. The Dow had a nice R/R 8:1 on a triangle breakout.
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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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