some advice please

i have been spread betting on the dow for about a year and overall lost money,i have read the books ect tried them and find they dont work.
One of my mates spread bets at £20 point on the dow only he makes his choice long or short on the following,the news and results oil price and most importantly his gut feeling in the last three weeks he made £8700 in about 15 trades what do you think is this a system? do you really need a system of charts ect.
one thing he does do is know what his max loss will be and gets out same with profits so he has a discipline what do you think

I think whatever system your mate trades is fine as long as he has a positive expectancy, (W:L and R:R) and his risk (£20/pt) is manageable for him (i.e. wont get him out of the game in less than 50 consecutive losing trades) and he has a strategy for getting out on good trades and on bad trades. But I have a sense he is either risking too much or has a very large capital base.

Assuming he's using a 'reasonable' stop for the DOW and trying to avoid his SB 'spikes' I'd guess 100pts. So if he's comfortable with a max £2000 loss per trade and he's only maxing say 2% of his base that would imply he's got an SB account value somewhere inthe region of £100K. Not bad! If these figures aren't close - then he may want to look again at what he's doing - while he still can.

If all his trades you mention were winning trades that's 425 pts on 15 trades which is 29 pts/trade - seems very achievable. However, if that's 15 consecutive wins I'd be starting to get a little cautious...

More of a concern in the inclination I get that you're thinking of copying him. Seems like all you got to do it get his 'gut feel' - which is obviously impossible.

If you want to trade yourself, you'll need to find your own style and system.

If all you want is the money and if you have the confidence, ask him to trade yours too. He might (for a fee!).

risking more

he is risking about 25% of his pot per trade you say that a bad idea but due to success he now is only risking 12.5% or less of his pot.
what i really want to know about systems is how much is gut feeling?
is your system rigid ie opening closing
hwo many points per month would you look to make on average

TheBramble said:

I think whatever system your mate trades is fine as long as he has a positive expectancy, (W:L and R:R) and his risk (£20/pt) is manageable for him (i.e. wont get him out of the game in less than 50 consecutive losing trades) and he has a strategy for getting out on good trades and on bad trades. But I have a sense he is either risking too much or has a very large capital base.

Assuming he's using a 'reasonable' stop for the DOW and trying to avoid his SB 'spikes' I'd guess 100pts. So if he's comfortable with a max £2000 loss per trade and he's only maxing say 2% of his base that would imply he's got an SB account value somewhere inthe region of £100K. Not bad! If these figures aren't close - then he may want to look again at what he's doing - while he still can.

If all his trades you mention were winning trades that's 425 pts on 15 trades which is 29 pts/trade - seems very achievable. However, if that's 15 consecutive wins I'd be starting to get a little cautious...

More of a concern in the inclination I get that you're thinking of copying him. Seems like all you got to do it get his 'gut feel' - which is obviously impossible.

If you want to trade yourself, you'll need to find your own style and system.

If all you want is the money and if you have the confidence, ask him to trade yours too. He might (for a fee!).

Click to expand...

Matty,

Good on your mate for making money but that level of risk per trade is a recipe for disaster. In most cases risks of this level will send you broke eventually. Whatever system you use, money management is the key to trading longevity and ultimately success IMHO.

Cheers

AT

this 'gut feeling' you speak of generally comes (eventually, if at all) with experience. Constant & disciplined study of your instrument, it's behaviour trait, a good understanding of price & how it reacts/works around key levels. The essence of trading is to develop an understanding of all it's components.

Take a look at the a few of the 'sticky' threads at the top of the relevant sections on this board. Have a look also at the Trade Planning threads to give you an idea of putting together a strategy which suits your style/time frame etc.....and most importantly study & become extremely AWARE of the money/risk managements aspects of trading....as has been pointed out already, that's one of THE most important ingredients of this game.

it may well be within your friends capabilities to trade in the manner you've explained, but he will most certainly be in the minority!.......it's all about 'staying in the game' & you're gonna have to be one almighty skillful trader to maintain (even for a short time period) those type of risk parameters!

have a good look round the board mate, and spend time researching the particular elements you'll require to trade the Dow....there's plenty of good, sound info available on here

here's one link which will hopefully offer you a start, there were a couple more in depth links on Trade Planning, but I can't put me fingers on em atm

http://www.prudenttrader.com/ptplan.html

I can not believe this post... I have concerns for your friend. As the previous post suggests gut feeling may if at all come with experience however your friend can't have this experience with the level of risk you imply. He is surely having a run of good luck which will end soon and also the pot of money with it. I suggest he stops his trading and studies the art of money management. Rule 1 never lose money and the only way is to preserve capital with sound investment decisions and money management. for example at 25% risk capital.. your friend loses one trade his next has to make 33% to break even.. it gets worse he loses on two he has to make 100% or three and 300% has to be made to recover his starting capital. As you can see this is not a system you could rely on.
It is recommended that you risk no more than 2% of your capital. I however only risk 0.5% but I have a large trading account and at this risk level I can still take a sizable position. It all depends on your account balance and your appetite for risk as to your own level because 0.5% of a small account may be to small a trade when commission is taken into account so you may increase to no more in my opinion 2%. If this is to small still you dont have enough money to trade. Continue to paper trade and save more capital.

I hope this helps.. I do not wish to offend you but rather inform you of the huge fall ahead..

Gut Feeling

I can only say there are only two possibilities here;
1) Your friend is not telling the truth which is quite normal with gamblers, which is what this is. My Uncle is a bookmaker and you would be surprised how many punters embellish things to their mates about how much they make. If you believed this then my Uncle would be on skid row rather than living in Malta half of the year.
2) He is a very lucky man to have gut feelings that make him money. Every now and again (not to often now though) I depart from my disciplined approach and follow my "gut feeling". Sometimes I win and sometimes I lose but I certainly lose more often and if I followed my gut feeling all the time then I would be bankrupt.

Denis.

He sounds like a good old fashioned punter to me. No real rhyme or reason.

And I wouldn't take a few weeks results as anything to go by. If he's still in the game in 3 years making good money then maybe he's pretty good.

Matty.......have a scan thru these pieces, they might offer one or two idea's to throw into your melting pot.....try see what they're 'getting at' rather than take the absolute word for word!....hope they help!

good luck with your endeavors!

Good Documents

Buk,

Very good documents with very sensible rules.

Denis.

Thanks Buk - excellent docs. The guy betting on the dow sounds like SB-fodder to me and may be experiencing a run of good fortune. I wouldn't rush to invest in his fund. The first time I went to a casino, in Vegas, I won £1000 in an hour - of course that was the worst thing that could've happened as it gave me a completely false impression of gambling. I don't partake in any form of gambling these days

Matty, however much your friend's "gut feel" equates to finely detailed perceptions of all the relevant fundamentals (which is indeed a "system", albeit a rather subjective and therefore non-duplicable one), if he continues to risk 12.5% of his capital on each trade, he _will_ eventually lose all his capital. It's not a question of "if"; it's a question of "when". If he plans to reduce his percentage a _lot_ further as his capital grows, then he _might_ just get away with it, as long as he has a very long lucky run at the beginning and his judgment of the fundamentals is consistently impeccable!

Buk,

Thanks for the Docs.

- Dave