Basic Strategy

This is a discussion on Basic Strategy within the First Steps forums, part of the Reception category; Is there any book which will describe simple stratagies ?Thanks...

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Old Dec 8, 2003, 4:05pm   #9
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Is there any book which will describe simple stratagies ?Thanks
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Old Dec 8, 2003, 11:20pm   #10
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Dr Alexander Elder ' Come into my trading room' has some examples and it is easy to follow but this is just one aspect of the book.
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Old Dec 9, 2003, 7:22pm   #11
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another great thread. And thanks to you and a few more of the guys on this site , im out of the Reception class and into YR 1 with a bit more money than when i started.

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Old Dec 9, 2003, 7:40pm   #12
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One suggestion

I know this was set up as a beginners strategy and trading the range is a good way to get to grips with support and Resistance, target profits and stops.

The one thing I do find is how many traders appear lost for what to do when a share price moves outside the range they have become accustomed to. My suggestion to improve and maybe take this a stage further would be to add when you find yourself trading a range and you have entered the market in the direction of the trend; then it maybe worth considering that the support or Resistance maybe broken. When this happens there is a real chance that the price surges away from it.

Now I realise this is probably going against the basic principle of what FB has so kindly provided but there is a well known saying 'trade with the trend'. In such circumstances I would be tempted to trade from 2 perspectives, especially if using SB as my medium. I would take profit with half when the target was reached and let the other half have a chance of trending through the support/Resistance.

As I say this is just a suggestion from trading trends by adding another dimension to what is a very good strategy in its own right. The reason I have mentioned this is that if I have learnt anything over these past years it has been that you have to be able to adapt to market conditions and this is one way that you could offer yourself a chance to run with the trend.

Of course you could filter this by making an assessment of how strong a support/Resistance level is, how many times has it rebounded before,what happened afterwards. If the price did not move up as high as before to the upper level Resistance then there is a better chance that it is trending down and vice-versa.

Anyway best of luck
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Old Apr 2, 2004, 2:53pm   #13
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Nicely laid out strategy - thanks FTSE Beater.

Can you expand on the concept of a "limit order", and what this means in terms of "getting a fill on the next bar"?
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Old Apr 3, 2004, 2:22am   #14
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Wonderful presentation FB.

"A fine excuse to pick a man's pocket every 25th. of December"
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Old Apr 4, 2004, 11:23pm   #15
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FTSE Beater started this thread Hi Axthree

Thank you for your kind comments

Hi Alby

A limit order is an order that is placed in the market and it instructs your broker to only pay a certain price for a product.

For example: If company XYZ is trading at £1 a share and you think that's too expensive, you can tell your broker to place a limit order at 90p. This means you will not get a fill over 90p for a share of XYZ. (A fill is when an order is executed and you have brought or sold a share), and therefore you will not pay more than 90p for a share.

With regards "Getting a fill on the next bar". If your looking back over old data (normally refereed to as Back-testing), then it is very easy to cheat. When I say "Getting a fill on the next bar" I'm looking to see if my price will have been executed

So in the example, this is what I mean:

However if we enter a limit order in the market at 1608 then we will get a Reward / Risk Ratio of 2.25
Lets see if we get a fill on the next bar.

Click the image to open in full size.

Yes we got filled. That last bar shows a high of 1610 and a low of 1604, so our limit order at 1608 would have been filled.
Ok, so we are now short with a stop at 1616
Because the latest bar shows a high of 1610 and 1604, then at some point the price traded at a price of 1608 (my limit), so therefore I would have got a fill. That last bar is showing that during the last 60 minutes, the price had moved between 1604 and 1610

I hope this makes a bit more sense. If it doesn't please let me know and I'll try and make it clearer
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Old Apr 5, 2004, 10:08am   #16
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You have to know what sort of orders you are placing and what can happen if your levels are hit.

Limit orders are great for liquid markets but can be very dangerous in iliquid or gapping markets. They can also be used as limit stops in addition to straight stops.

'buy at 100 stop' - would mean that you will be filled if the price touches 100 - remember you will be filled 'in turn' so where you get filled depends on where in the pecking-order your trade is sitting and how much volume is available to sell. This is what usually makes a mockery of backtesting on stocks or other illiquid markets.

'buy at 100 limit' - would mean that you are prepared to pay 100 (or less) if 100 is hit, but no more - this is not a guarantee that your order will be filled. If 100 is hit and never trades again (ie the price moves upwards) then you will not be filled.

' buy stop at 100, limit 105' - would mean that your order to buy is triggered if 100 is hit, or passed. The broker can then work your order up to a maximum of 105. If the market hits 100, then gaps to 110 you will not be filled as the price has exceeded your limit of 5 points.

Limit orders are great if you are entering new positions (rather than closing existing positions) as you have the luxury of picking your price, they can give a false sense of security if used to close positions.

Last edited by TBS; Apr 5, 2004 at 12:43pm.
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