The Basics of Trading

This is a discussion on The Basics of Trading within the First Steps forums, part of the Reception category; Has anyone got any advice of how to avoid or deal with spikes - by that I mean the out ...

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Old Jul 17, 2005, 10:54pm   #393
ale
Joined Dec 2004
Has anyone got any advice of how to avoid or deal with spikes - by that I mean the out of range highs/lows that are apparently caused by the Market Makers playing silly B*****s and trying to break stop losses?
A good example of this is Rolls Royce with a sharp negative on July 7th and a sharp positive on July 8th.
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Old Jul 17, 2005, 11:09pm   #394
Joined Dec 2001
ale how is this causing you a problem?
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Old Jul 18, 2005, 12:55am   #395
ale
Joined Dec 2004
It hasn't yet but I live in fear.
It must have happened to many more experienced traders.
Take a long trade on Rolls Royce at the beginning of May.
Buy in at say 245 with a stop at 225. Looks safe and makes about 10p before a large down spike to below 200 takes out the stop.
Buy in again mid May at 260 with a stop of 245. With a rise of 30p and raising the stop to secure gains, it's taken out again on July 7th with a blip down to about 245.
Under these circumstances it seems bad practice to use stops.
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Old Jul 18, 2005, 8:52am   #396
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Quote:
Originally Posted by ale
It hasn't yet but I live in fear.
It must have happened to many more experienced traders.
Take a long trade on Rolls Royce at the beginning of May.
Buy in at say 245 with a stop at 225. Looks safe and makes about 10p before a large down spike to below 200 takes out the stop.
Buy in again mid May at 260 with a stop of 245. With a rise of 30p and raising the stop to secure gains, it's taken out again on July 7th with a blip down to about 245.
Under these circumstances it seems bad practice to use stops.
We come back to the old, old question of where to put the stops.

You put in, what you thought, was a safe stop of 20 points below. When you get stopped out you are faced with the dilemma of how to get that 20 points back, which you have to do before you start making an overall profit again. You are not alone of us with this problem. I, and most of us have it. Perhaps it is better to try closer stops and, instead of losing 20 points at once, risk a lesser amount a few times?

This is what makes us individuals when it comes to decision making. There are no hard and fast rules.

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Old Jul 18, 2005, 9:35am   #397
ale
Joined Dec 2004
Sorry,
I realise that I didn't make my point very clear.
The question is not related to where to put the stops but more about trying to avoid the blips.
Are there some stocks/sectors more prone than others? Should these be avoided?
If there has just been a blip is there likely to be another in a week/month?
If the stock hasn't had any blips in the last 3 years, is it off the MM's radar? Is there any way to determine what is on that radar?
How many people do not use stops if the stock is prone to blips?
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Old Jul 18, 2005, 10:59am   #398
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Post Re: The Basics of Trading

Quote:
Originally Posted by ale
Sorry,
I realise that I didn't make my point very clear.
The question is not related to where to put the stops but more about trying to avoid the blips.
Are there some stocks/sectors more prone than others? Should these be avoided?
If there has just been a blip is there likely to be another in a week/month?
If the stock hasn't had any blips in the last 3 years, is it off the MM's radar? Is there any way to determine what is on that radar?
How many people do not use stops if the stock is prone to blips?
Lots of people do not use stops because of the spike factor. I used to be one of them because I did not trust the SB companies. Now, I use them more.

No one can foresee when there will be a spike. If there is a shortage of stock the marketmakers make rock the tree to see who they can frighten into selling. The other reason is a panic, of which the massacre of July 7 is an example. No one could foresee that and after winning the Olympic nomination the previous day, it was the last thing to be expected.

I was stopped out that day . In a good previous day's trade I had moved my stop to just above breakeven. Finspreads stopped me out at that point even though the price fell another 25 points below it so I would like to give them full credit for that as I know that not everyone is happy with them.

In a nutshell, I don't think that spikes can be avoided and they come at different times of the day.

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Old Jul 20, 2005, 3:23pm   #399
 
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Joined Jun 2005
which stockbroker?

Good day all,

This will be my first time on trade2win, but i have been reading alot about it and would like to congratulate you on your community spirit.

I want to start trading, presently i reside in the British Virgin Island, i am a brit but would like to invest in the US markets, i need a brokerage and was hoping you could give me an idea of how to go about finding a good one.

cheers
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