The Basics of Trading

This is a discussion on The Basics of Trading within the First Steps forums, part of the Reception category; Right Mark, for what it's worth here is are my views on your choice of shares. BSY Short S/L 589 ...

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Old Feb 8, 2003, 7:49pm   #61
Joined Jun 2002
The Basics of Trading

Right Mark, for what it's worth here is are my views on your choice of shares.

BSY Short S/L 589 (previous high) Target 458 (previous support)

CBURY Long S/L 319 (previous high) Target 390 (previous support)

FP Short S/L 99 (previous high) Target 82 (previous low)

GKN - would not trade short - all my indicators show downward trend.

VOD - long S/L 105 (previous low) Target 126 (previous high. )

As a novice I have probably made a right dingbat of myself, but if you don't try, you don't get constructive criticism
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Old Feb 8, 2003, 9:50pm   #62
 
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BSY - currently at the lower edge of a range approx 555 to 690. As such it can be traded short if it breakes down through the range or long if it bounces.

For the long trade I'd enter at 571 on the swing with a stop at 550 and a target of 660.
For the short trade I'd enter at 550 with the stop at 620 and a target of 470.

Long: Reward/Risk is 89/21 = 4.2
Short: Reward/Risk is 150/70 = 2.1

CBRY - Interesting! Either a base forming OR start of a measured move down. Currently at support as last defined in Feb 2000.

Long above 340.Target 370. Stop at 315. RR 30/25 ~ 1 = rubbish.
[Short below 315. Target 285. Stop at 340. RR almost same as above.]

FP. Horrible congestion just above current area at 100p from Sep/Oct coincident with downtrend line from beginning of December. So the stop has to be about 102p. Just wouldn't short this share myself ... do you know what the yield is? It is projected at >7.5% ... has me almost salivating as a value player ... just want to see a retest of 82 for a 2B long entry ... very confused. Pass!

GKN - If your insisting on a long (and the yield warrants it) then the target is about 199. The entry is at the first high to go above the previous days high and the stop at the previous days low. Assuming Monday delivers the goods it is:

Entry at 182, stop 174. RR is 17/8 = 2. Horribly small on 'points' though - would need to check the spread/costs and factor in.

VOD - Long above 115, Target 124, Stop 104. RR 9/11 = 0.8. Too low.


Having done that can you expand upon why you selected the trade direction in each case? If it's to test us then that's fine but I'd like to understand the logic as several seem to be against my perceived direction of trend ...

Of them all only the first would seem attractive to me. A very interesting exercise though which will probably throw up all sorts of things/assumptions I have to learn/unlearn!

Cheers,

Andrew
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Old Feb 11, 2003, 8:38pm   #63
 
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FTSE Beater started this thread Hi all

I'll be posting up my views tomorrow night, so if anyone else would like to put there views forward - feel free, and remember there is no wrong or right answers
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Old Feb 12, 2003, 9:19pm   #64
 
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FTSE Beater started this thread Hi All

Here's my view on these:

BSY

Click the image to open in full size.

The stop for me would be above the last up leg, so about 620. This also coincides with the support in December. The target would be the October low of 450.

So risk 40 points and reward 130. 3.25:1 reward risk ratio
Orchard - I think a 589 stop would be too close. I wouldn't class 589 as major resistance (which is what were trading off). On a 60min chart maybe that would be strong enough resistance to hold it.


CBRY

Click the image to open in full size.

Orchard, I agree with you on this one. The stop would be under the February low, as I would be looking for CBRY to start the up leg.
The target I've drawn in at 395 might be a bit ambious, but there is no major resistance until that point.

iSquared - Your right, if it starts a measured move down, then we would want to be out, hence the stop at 315


FP.

Click the image to open in full size.

iSquared - Your with me on this one, I wouldn't like to be short on it, but sometimes you find yourself in these situations and have to make the most of it.

The stop at 102 looks great, especially as it's just beyond the September / October support level.

Orchard - It's worth paying an extra 3 points to see if the 100 support will hold. If the old support wasn't there, then I would agree with you entirely


GKN

Click the image to open in full size.

ooohhhh Ugly chart - Who said long on this one - oh yeah me

These are the types of trades, that I hit the wrong button on. The only thing to do is find the nearest exit and run, in this case just below the Friday close. I'm glad neither of you were going to trade this.


VOD

Click the image to open in full size.

This is a tricky one. I feel the stop should go under the last low, But I would feel uneasy if the current short-term trend changed, as the chart stands now though, I agree with Orchard although I would be monitoring it closely.

iSquared. I think you highlighted it brilliantly, when you say there wasn't enough reward.

Tricky one to trade that.


I hope that would class as constructive criticism, and as always, if you have any questions feel free to ask. It doesn't even have to be about the 5 shares mentioned above

Take care
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Old Feb 13, 2003, 9:15pm   #65
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Mark (FTSEB).

Thanks a lot,I got 3 out of 5 correct and learnt a lot from this exercise.
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Old Feb 14, 2003, 10:18am   #66
 
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Mark,

I found this very useful. As a result rather than just skipping through charts until I see something interesting I'm making notes on them as I go. At the least time now indicates when, if any, I should have pulled the trigger - although so far in more cases than not staying away is the right thing to do. I think it too easy when looking at historical information, with 20/20 hindsight, to fool oneself into doing just the right thing while pretending that chart doesn't actually do what you anticipate after the brilliant (retrospective) entry!

Cheers,

Andrew
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Old Feb 14, 2003, 12:48pm   #67
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Mark,

I agree with Fluke and Andrew. Very useful. Your critiques were also on the spot for me - pointing out where I might be wrong, and right!.

Made me look closely at the charts instead of an overall view which I usually did.
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Old Feb 14, 2003, 10:53pm   #68
 
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Simulating

FTSE Beater started this thread Hi all

Thank you for your kind comments, it means a lot to me that your getting something out of this.

Thanks goes to iSquared for his last post and giving me a better idea of what to talk about this week.

So far weíve covered, the basics of Technical Analysis, Money Management and the concepts behind risk and reward. That is pretty much the basics behind trading, so the next step is to start putting this knowledge to use.

If your looking at end of day charts, then the process of trading can be a slow one, after all you have to wait a complete day for a new piece of data.

The best way to practise is to go back over old charts and try to analyse it from there. I was once told ďPractice doesnít make perfect" Ė but perfect practise, now thatís perfect. So I would like to spend some time going over how Iíve analysed data in the past. This should really help the learning process:

Take a stock or a chart that you donít know anything about, and pick a time 2 or 3 years ago. This way you have no idea of what has happened in the past, and therefore can not cheat. You then analyse the chart you have, and then forward the data one day at a time. This will create a new bar and from that you will have another bit of data to decide whether to trade or act on.

If your using the Sierra Chart package then you can use the right arrow key to jump one day at a time.
There is a function on ADVFN to view a set date range. From that what you have to do, is change the ďTo dateĒ

Lets have a look at this example: Barclays 5th May to 5th November 1997 http://www.advfn.com/cmn/chrt/chrt_w...nd1_3=&ind2_3=

Click the image to open in full size.

At this point I canít see anything in the BARC chart that I like, so Iíll jump a day at a time until I see a set-up I like.


Click the image to open in full size.

Ok, this has bounced between the downtrend and the uptrend, so there could be something to watch here


Click the image to open in full size.

A couple of days later the downtrend has gone, so at this point I looking to buy and use the uptrend as support. Ė Iíll wait another day though to see if I can get a better entry.


Click the image to open in full size.

Now the chart has tested the uptrend, Iím happy to go long. So Iím long at 362 with a stop below the trendline at 355 and a target of 400 (which is the support in October). This gives a risk / reward of 5.43:1


Click the image to open in full size.

One bar later and the trendline is still holding price, so I need to go one bar at a time until, I see something of interest.


Click the image to open in full size.

Oh dear. The trendline got broken and I was stopped out for Ė7 less any commission.
Now Iíve got to look back at the chart again and see if there is anything I should have seen or done differently.
In this case, I should have waited to see a solid bounce off the trendline before entering. I should have also seen the short-term downtrend which if broken would have been an indication that the price would be moving up.


And thatís how to practise trading. Simple really, but if you do it properly, you can really benefit from real data without having to wait days for the next bit of data.


I canít think of anyway to put this into practise, so itís the same exercise as last week, with different companies though. Ė imagine you are in the following trades, where you think the stop-loss will be and a rough target. For all of the charts, weíll be looking at the EOD chart, over the last 6 months.

<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>ABF</td><td>A.B. Food</td><td>Long</td><td>http://www.advfn.com/cmn/chrt/chrt_w...nd1_3=&ind2_3=</td></tr> <tr><td>2</td><td>AL.</td><td>Alliance and Leicester </td><td>Short</td><td> http://www.advfn.com/cmn/chrt/chrt_w...nd1_3=&ind2_3=</td></tr> <tr><td>3</td><td>DGE</td><td>Diageo</td><td>Short</td><td>http://www.advfn.com/cmn/chrt/chrt_w...nd1_3=&ind2_3= </td></tr> <tr><td>4</td><td>JMAT</td><td>Johnson Matthey</td><td>Long</td><td>http://www.advfn.com/cmn/chrt/chrt_w...nd1_3=&ind2_3=</td></tr> <tr><td>5</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> </table>

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

If you would like me cover anything else next week, then Iíll see what I can do. Just let me know by private message.

Take care
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Old Feb 15, 2003, 12:32am   #69
 
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Can I just add a point here.... It's a well documented feature of the DOW, but may not be relevant to a specific stock, but worth noting anyway. The chart shows a typical triangle action. OK so you can't really be sure which way it's going to go. Patience will be rewarded. Afer the breakout, there is almost always a pullback the the old resistance/support, which, after the breakout reverses. So Support becomes resistance and vice verca.There will be a small loss of R/R, but with a higher probability of a winning trade......
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Old Feb 15, 2003, 1:14am   #70
 
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And as luck would have it, today sees an exact example for real on the dow........The action today was not on the price, but in RSI. Sometimes it is seen in CCI and sometimes you will see it in the price.Either way, that is your buy signal.Good hunting.
Excellent series,FTSE.
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