Trading plan using support/resistance

[kr2009]

Hi,

I have been trying to follow a trading plan based on favourable risk/reward trades using support/resistance on the FTSE 100 index and on some of the composite stocks, including AAL, RIO, and XTA. The problem I am having is that I am setting up stops a few point above/below previous resistance and support levels. In terms of profit of course as soon as the limit level is hit then that is the profit I am given. However, during times when the price has broken through previous S/R levels I am sometimes not getting closed out by IG index until many points beyond my stop (30 pts in one case) meaning it is near impossible to work out a risk reward ratio in advance, and subsequently meaning losses when they occur have exceeded gains.

Does anyone use a similar trading method who can help me refine my strategy? I have been using resistance/support levels on daily charts and then attempt to hold until an historic r/s level is hit. Perhaps there are better stocks to use for this approach, as the miners often gap significantly which can completely undermine the original risk/reward evaluation.

Any help greatly appreciated from an increasingly despondant trader!

Karl

 

[TheBramble]

Karl, seems your main problem is the execution side with IG Index rather than your system.

That part is fixed very easily. Use a bona fide broker with direct access.

 

[Profitaker]

Trade the market, not against some company running it's own book (e.g., IG, D4F, etc). A good broker wants you to well in the market, and will bend over backward to assist you.

You need Direct Market Access (DMA).

 

[kr2009]

Thanks for the advice. Do you have any direct recommendations for a company that I can use? I am only running a small account of £1500 at the moment so had previously thought that this would only be suitable for a spread betting account.

 

[TheBramble]

I'd recommend IB, but I think they have a minimum deposit of around $5K. So if you can find another £1K you could just abput squeeze in.

Having said that, it is a very tight amount to be starting out with. The paradox is that most traders start small and some put themselves out of action simply by being undercapitalised even when their discipline and methods are sound.

No way round that except by putting more dosh in the pot.

Small cpaital and SB are an obvious partnership, quite deliberatley so, but they don't mix very well. Great business model for the SBs though....