Trial and Errors Journal

[Black Swan]

Guys, can I just ask a question of the more experienced traders/posters here, have you noticed that this is how a lot on new traders have traded/do begin to trade; get a few grand together and literary hand it over to IG/CMC/CS etc in less than a month...?

 

[rsd886647]

Hey, wait a second. I haven't handed over my money to IGmarkets. I've simply lent it to them for a while.

 

[JRP2891]

I think you need a reality check. From what i've read you're just gambling as you don't have any tried and tested system and your money management has been dire. Go and paper trade until you're consistent because £9000 is still no where near the amount you'll be giving to the market in tuition fees at this rate. Sorry to be harsh but you're not on the right road here.

 

[rsd886647]

Fair point. But I do have a good system (tried and tested by someone else). I just haven't got used to working with it yet. For instance, I saw in my charts that the sp of mining stocks was going to rise, starting on Friday morning, but I didn't see this until I reviewed my charts on the weekend. I jumped in on Monday morning, but it was too late and I missed the boat again. I should have seen this before the end of trading on thursday if I want to make money in this game. I must learn to draw up the charts before the end bell, and read them correctly ahead of the action. I will get there.

I wouldn't invest 9000 pounds unless I thought it would reap rewards.

 

[rsd886647]

The mining shares have more upside over the next week. I have bought Xstrata (290 shares).
My entry point was poor, but I hope to double my 150 pounds over the next week.


Lessons of late

I should plan my trades with the use of graphs, being mindful of the amount of capital I can use and the most likely entry points and stops.

I should try not to build such strong preconceptions of what the market will do that day that I fail to
react appropriately to how it is actually performing.

I should be patient and not over-eager to trade for the sake of trading.

I should be reluctant to trade when the market is mixed and choppy (i.e. banks up, miners down)

I should be mindful that when one issue in a sector receives negative publicity, it can often bring other issues down too (and vice versa).

I should rely more on the time cycle between lows particularly and hold off from buying long until the estimated time frame for the next low has been reached.

I should not be too disheartened by opening or closing trades at sub-optimal points as I am a beginner. Timing will improve with experience. I should instead focus simply on making a profit.

I should make some rules about the maximum amount of capital I commit at any one time, and how much of the profit I set aside as savings. Given my limited capital holding at present, I will allow for a maximum possible loss of 50% of my capital and put aside 20% of profits.

I trust the system I use and should refrain from trading until the graphs dictate that it is the right time to do so.

 

[JRP2891]

I think you need to do some reading up on the mindset of a successful trader, as no system will make you money unless you're ready to start making money. ' Reminiscences of a stock operator', 'markets wizards', 'new market wizards', 'trading in the zone' and van tharp's 'trade your way to financial freedom' are all books new traders should read at least twice before committing a single penny to trading.

 

[Black Swan]

The mining shares have more upside over the next week. I have bought Xstrata (290 shares).
My entry point was poor, but I hope to double my 150 pounds over the next week.


Lessons of late

I should plan my trades with the use of graphs, being mindful of the amount of capital I can use and the most likely entry points and stops.

I should try not to build such strong preconceptions of what the market will do that day that I fail to
react appropriately to how it is actually performing.

I should be patient and not over-eager to trade for the sake of trading.

I should be reluctant to trade when the market is mixed and choppy (i.e. banks up, miners down)

I should be mindful that when one issue in a sector receives negative publicity, it can often bring other issues down too (and vice versa).

I should rely more on the time cycle between lows particularly and hold off from buying long until the estimated time frame for the next low has been reached.

I should not be too disheartened by opening or closing trades at sub-optimal points as I am a beginner. Timing will improve with experience. I should instead focus simply on making a profit.

I should make some rules about the maximum amount of capital I commit at any one time, and how much of the profit I set aside as savings. Given my limited capital holding at present, I will allow for a maximum possible loss of 50% of my capital and put aside 20% of profits.

I trust the system I use and should refrain from trading until the graphs dictate that it is the right time to do so.

I'm thinking 2 things when reading this car wreck of a thread; where will this thread be in perhaps a years time and where will you be? I hope you get it right, but IMHO you need to stop trading with real money now. I see no evidence of any trading plan in place, yet alone a 'methodology' of sorts, notwithstanding that your head appears to be all over the place. You're not trading you're guessing, you think it's educated but it isn't. Your remarks on being a day or two late are frightening, 5 minutes too early often loses me 30 pips (and a girlfriend 20 years back) but FFS you're methods are truly scary and should be posted up as an example of how not to attempt to trade. I hope you get lucky, re-gain your losses then sit back and start again. Good luck.

 

[rsd886647]

Now I am trading purely by my charts, and now that I know how to read my charts properly, there is no guesswork or luck involved. My methodology revolves around being able to predict price movements. I may suffer from a lack of a trading plan and being somewhat erratic, but I have no doubt that I will make money.

 

[JRP2891]

I may suffer from a lack of a trading plan and being somewhat erratic, but I have no doubt that I will make money.

You will not make money without a trading plan and proper money management. At the moment i feel you are deluding yourself. Stop being reckless and go back to paper trading until you demonstrate you can be consistently profitable.

 

[JBJames]

RSD - I'm with everyone else in their advice. Stop live trading until you know that you have a valid method that is consistent and works.

You've alreayd lost a lot of money and now starting with a fraction of what you lost to try and get back what you've lost. The reality is when you lose the amount of money you have in a short period you'll be trading with emotion. You might not think you are but it's bound to effect your judgment .

Take some time off, paper trade then when you're certain and have a system that works (because lets be honest your record isn't exactly good at the moment) then go back to live trading.

 

[rsd886647]

Ideal Trading Plan

Each trade should only be made if the charts are giving strong buy or sell signals. A pre-defined entry/stop/target should be based on a reward to risk ratio of at least 2:1, with the trade not taking more than 25% of account capital.

Buy long when the short term trading index indicates that the market is oversold, the momentum index shows a trend reversal and that strong accumulation in an issue has taken place.

Sell short when the short term trading index indicates that the market is overbought, the momentum index shows a trend reversal and that strong distribution in an issue has taken place.

Assuming all these things fall into place, I feel very confident with this system. The problem was I wasn't trading by this system before, I was trading purely on emotion. I managed to double my capital on the xstrata deal, so if I pick my spots and take it very carefully and don't get reckless, I hope to proceed profitably.

 

[JRP2891]

Until you have enough capital to take positions where you risk 5% or less of your total account, you should not be trading with real money.

 

[rsd886647]

Unfortunately, I am determined to at least make an attempt at a comeback with what I have, and hence must trade with a relatively high element of risk. I feel confident that my charts won't let me down. Within a week or two, I hope to be in a position to practice sound money management.

Having said that, I think I will always be tempted to risk a decent chunk of my capital if I felt particularly confident about a trade.

I'm currently shorting Xstrata; it started falling on Friday. I sold short late thursday before it started falling, as my charts indicated it would fall on Friday. That is the confidence I have in my charts. I hope it will fall to about 700.

 

[JBJames]

Rsd,

Honestly you need to start listening to people who take the time out of their lives to respond to this nonsense seriously.

Everything about your previous post is screaming that you really have no idea what you're doing. I'm not suggesting that I myself do but it is obvious that you are totally out of your depth. The first HUGE mistake is trading with a high element of risk to your capital. You say that you feel confident in your charts but your history has clearly shown that you should not be. You quite frankly do not have enough knowledge to be making the assumptions that you're making.

Secondly, in a week or two practising sound money management?! If you insist on trading then you MUST MUST MUST be practising it immediately. There is no quick fix in this world that you have plunged yourself in to and with little starting capital as you now have you have to accept that you are not going to make decent money for a long time.

There is such a thing as overconfidence and if you are "tempted" to risk more of your capital that you should be (Through a decent money management plan) then you are nowhere near detached, trading on emotion and therefore lacking in logical thinking or being methodical enough to be able to succeed.

Go away and learn more because you certainly need to.

 

[rsd886647]

JBJames,

I am listening to what people are saying and I appreciate people who take the time to post their views. I have researched trading plans as a result of comments posted here and people helped me realise that trading on emotion is a quick way to ruin. I started trading after coming across a very promising system devised by a trading guru, and I thought I would give it a go. However, I actually had so much fun trading that I ended up ignoring the system and running on emotion instead, and hey presto, I busted out. I went back to the system and realised that I had to follow its rules completely if I was to succeed. I do have extreme confidence in the charts as I have seen evidence time and again of how they have predicted price movements. It has taken a while to implement the methods and learn how to use them, but I now truly believe in this system and, though I thought it would be less exciting to be bound by rules, I am actually very much excited by it.

Sure, my confidence given my past results probably gives the impression I am delusional, but time and performance will tell.

Rsd,

Honestly you need to start listening to people who take the time out of their lives to respond to this nonsense seriously.

Everything about your previous post is screaming that you really have no idea what you're doing. I'm not suggesting that I myself do but it is obvious that you are totally out of your depth. The first HUGE mistake is trading with a high element of risk to your capital. You say that you feel confident in your charts but your history has clearly shown that you should not be. You quite frankly do not have enough knowledge to be making the assumptions that you're making.

Secondly, in a week or two practising sound money management?! If you insist on trading then you MUST MUST MUST be practising it immediately. There is no quick fix in this world that you have plunged yourself in to and with little starting capital as you now have you have to accept that you are not going to make decent money for a long time.

There is such a thing as overconfidence and if you are "tempted" to risk more of your capital that you should be (Through a decent money management plan) then you are nowhere near detached, trading on emotion and therefore lacking in logical thinking or being methodical enough to be able to succeed.

Go away and learn more because you certainly need to.

 

[rsd886647]

I closed the Xstrata deal at 692 with a profit of 150 pounds. My capital totals 430 pounds.

The mining issues' distribution curves on the whole have held up well against the ftse's dive. I like the look of vedanta, which has fallen 20% since its previous high, and tends to increase by 20% over a bullish period, about 5% more than Xstrata averages, so I shall be buying that next.

I bought in today at 1486. In hindsight, it is a bit of a mistake. I've taken the slowdown in distribution and the momentum index reaching its likely pivot point as a sign to buy in, but this is still jumping the gun. I should have waited for confirmation of accumulation.

 

[Black Swan]

I closed the Xstrata deal at 692 with a profit of 150 pounds. My capital totals 430 pounds.

The mining issues' distribution curves on the whole have held up well against the ftse's dive. I like the look of vedanta, which has fallen 20% since its previous high, and tends to increase by 20% over a bullish period, about 5% more than Xstrata averages, so I shall be buying that next.

I bought in today at 1486. In hindsight, it is a bit of a mistake. I've taken the slowdown in distribution and the momentum index reaching its likely pivot point as a sign to buy in, but this is still jumping the gun. I should have waited for confirmation of accumulation.

so Vedanta has lost what, 10% in the last 24 hours? What signal/s did you use, or discretionary skills to take such a punt?

 

[rsd886647]

I used a weakening in the distribution curve, but this was too hasty. I would be better served to be more patient and wait for accumulation signals. I still suffer from a lack of patience. The share price started to rise on Wednesday, from just below its previous low point, and with the momentum index showing some trend reversal across the board, I got trigger happy. As I said, it was a mistake.

 

[rsd886647]

I tend to get a little carried away with myself when I embark on new endeavors, and I know it irks some people. There is a reason for this, other than the fact I'm, for want of a better word, a douche. I would like to have seen an accumulation signal, but it is possible that there won't be one as not every bullish run is preceeded by an accumulation signal, nor every bearish dip preceeded by a distribution signal, so sometimes one will be expected to judge it purely by using the momentum index and the current trading range. This is what I'm trying to do with this one at the moment.


added a bit later...

My timing is impeccable once again. No sooner than I decide to stop trading Xstrata, than the following RNS comes out;

LONDON (Reuters) - Mining group Xstrata (XTA.L) has approached its rival Anglo American (AAL.L) to propose a 41 billion pound ($67.07 billion) merger, the Sunday Telegraph reported.

Well, at least the mining sector as a whole should get a boost tomorrow.

 

[rsd886647]

well, Xstrata actually suffered as a result of this rns which surprised me. When RIO Tinto and BHP announced a similar merger of equals, both their sps rose 10%.

Turns out that Xstrata is seen as the takeover company and would be required to pay a premium. Small details make a big difference.

The mining sector did not get a boost at all, and endured a big sell off once more. It's difficult to say for sure, but one would hope we have now reached a bottom of the correction. Vedanta eventually fell to 1262. On the way down I averaged down and sold when the price rose and made a bit, but then had to sell part of my holding at a loss. I guess overall I am down 200 pounds, but I do hope we have bottomed out and the sp rises from here. I have indeed learnt another big lesson; I will not trade from this point on until I can see an accumulation signal staring me in the face.

Alas, I have identified just such a signal on my Kazarkhmys chart and I am buying long at 604. I will try to attach the chart.

Happy days.