How To Make Money Trading The Markets.

Hi , could u disclouse what settings u use for esignal scanners ? i tried them for a free trial and i found them normal and not very usefull , i use proscreener from IG charts , u can code it to search US stocks ( only stocks offered by IG ) using predefined criteria , for eample : u can search for stocks with a 10 EMA above 21 EMA above 50 SMA and with a 60+ RSI with stock price between lets say 30 - 60 $ . Do u have any suggesstions about which setting to use for this proscreener ? i can code it if u want it is easy .

richard fantastic thread, thanks very much for your time posting, has really opened my eyes to your style of trading,it fits my personality better than anything else i'v tried so far.

Tar,
i trust richard wont mind if i have a go answering your question, settings for scanners, are probably better worked out by you, so you understand how they work ect. but try looking at these ideas,
scan at the open for gaps ABOVE yesterdays high (see richards post #357 WYN) as example
secondly (i dont have esignal so not sure how to on it) look for "RALLYING now" type of scan and set it for 15/30 min if you have a retraced from high setting try less than 10%.
im new to this style but both of these have given me a fair few setups, altho im still working on it.
cheers Bry.

tar,
I don't use "proscreener" so can't advise you.

bfirth,
Excellent post, thank you
Richard

Here's the MEE trade I mentioned the other day.
Entry on the red X hairs as usual, exit at time of screen shot.
The rush of buying had died and the sellers looked as if they might take over so I exited without waiting for the bottom of the previous candle to be taken out.
+50c per share

I always address maximum risk first, reward usually takes care of itself.
ATR 15
Bottom of candle 8c away.
Maximum risk 15c.
In this example let's say the person trading it had a personal maximum risk of $100 on the trade.
That's 666 shares, rounded to nearest hundred is a 700 share position size.
Maximum risk $105
Profit of 50c means that person would make a profit of $350 on the trade.
Richard

Excellent thread Mr Charts/Richard.

I take your point about the likelihood of the equivalent SB deals being unprofitable due to the bid/offer spreads etc etc. However surely you're losing 40%+ of your income to the inland revenue whereas the spread bet trader is dealing tax free, so he can be less profitable and still end up with as much cash in his pocket.

True or over-simplistic? Would appreciate your comments.........

Sam

Hi Sam,
I'll try and answer your question so that Richard can focus on the nitty gritty of the thread. SB is fine for longer term plays - e.g. swing trading, possibly even intra day swing trading where the trader holds positions for hours at a time. True, there are traders who successfully use SB firms for short term day trading - but there aren't that many of them. Fewer still will day trade U.S. stocks. There are good reasons for this:

1. The spread. The tax that Richard and other direct access traders pay to Mr. Darling - the SB trader pays to the SB firm. Mr. Darling then taxes the SB firm so, either way, your money ends up in Darling's pocket. You pay tax regardless of how you trade, it's just a question of who collects it. Mr. Darling loves SB companies because he collects a whole chunk more tax from them than he does from direct access players like Richard.

2. Direct access players have greater control over their orders and executions. SB clients are at the mercy of the SB firm who make their own prices. If he so chooses, Richard can play the Market Makers game and buy on the bid and sell on the ask, thereby capturing the spread. Try doing that with a SB firm. (NB. don't ask Richard how he does this - he won't want to answer that Q on this thread.)

3. Very tight stops. SB Co's tend not to allow you to have tight stop loss orders which (most) day traders require. Even if they do, once they're in place, the person on the other side of your trade (i.e. the SB Co.) can see exactly where your stop is because your using their platform to trade with! If it's tight enough and they want to - they'll take it out and you'll be stopped out for a loss.

4. Psychology. Day trading major stock indices via SB firms is one thing as most offer 1 or 2 point spreads these days. Stocks are a very different matter - especially U.S. ones. Richard rarely trades stocks with a spread wider than 3-4 cents, many are less than this. You'll struggle to find many U.S. stocks quoted by the SB firms with spreads this tight. Most will be 3, 4 or even 5 times as wide as the underlying. When Richard enters a trade via Direct Access, he's usually in profit within a minute or two. With a SB firm, you'll start every single trade with a loss and have to wait much longer for it to come into profit - if it ever does. This will mess with your head big time! If price falters and you lose your nerve, you'll close out with a loss. If Richard is in the same trade and loses his nerve (tehe!), he'll close out with a small profit or maybe at break even at worst. Trading via direct access will help to reduce the psychological pressures and enable the trader to make stress free decisions and trade well. You'll struggle to do this with a SB firm for the reasons given.

The list goes on, but this should give you a flavour as to why day trading U.S. stocks via a SB platform erodes your edge rather than supports it.
Tim.

Thanks Tim - everything you say makes sense. One way or other you pay the tax, so why not have control of your own trades with no "SB middleman"!

By the way, under UK tax law, does profit from this type of short term trading come under the income tax rules or capital gain tax rules? (.......I'm assuming that a UK citizen trading US stocks from the UK will be taxed under UK tax laws rather than US?)