I am a Trade2Win (T2W) home grown lad.
I have no background in trading or technical analysis (TA). My father had no experience in the stock market. He invested some of his savings in the early 1970s and lost most of it when the market crashed in 1974. He did not wait a couple of years for the market to spring back. After watching him go through some pain, I vowed never to invest in the stock market. Luckily, he had some money invested in residential property, so all was not completely lost.
I grew up in Manchester. I am a Manu fan, went to the local grammar school and did science ‘A’ levels. I then went to University College London to study dentistry. I qualified as a dentist and went to work in general practice, which I have been in for 25 years. During that time I put aside money in the NHS pension scheme and, also, a private pension scheme. I did not look at the latter until the late 90’s, when I transferred money to a technology fund, which seemed great. This went up in leaps and bounds. Suddenly, I had a liking for the stock market!
Trading – the early years
I then went and enrolled as a client at a stockbroker which was near my dental practice in Surrey. I took their advice and invested all the pension pot into tech stocks. This was during the dot com boom. Consequently, over 80% was lost, swiftly. No stop loss or TA was used by the stockbroker. They just relied upon cash flow projections. The P/E ratios were in the stratosphere. So, from this, both my father and I have taken a pasting in the market.
Very distraught, I still looked at Investors Chronicle and Shares magazines. Spring 2003 is when I first came across T2W, I think from an ad’ in Shares magazine. I joined up and started reading the forums. At this point I had no clue what TA was but, as I read, it dawned on me that I could use charts to track price. I then went to a whole day course hosted by advfn. This was given by Tom Hougaard and it was an introduction to TA. Great stuff, but a lot to take in on one day. At the course, I met David, a retired general practitioner. We got friendly and he gave me sackfuls of his trading books that he had read. I ploughed through some of these and had no joy on what I really thought was a reliable method. I even did a one day course with Mr Charts, but this did not help me.
In 2004, I responded to a meet up in London, which was posted by bbmac on T2W. At that time, we seemed to want to trade with oscillators with certain settings, never mind the trend. But I did follow bbmac‘s postings and, a few years later, he published his support and resistance methodology. This was what I really wanted.
During 2005, my trading friend, David, went to a course at the offices of Updata. He came out and said that Jeremy du Plessis was the most pompous ass he had ever met… but… he did think he was the best analyst he had ever listened to. It was later in the year that du Plessis’ book The Definitive Guide to Point & Figure was published. I bought it and studied it, having some knowledge on Point & Figure (P&F), as I had read Rivalland’s book: ‘Marc Rivalland on Swing Trading’. A few months later, I subscribed to the Updata end of day (EoD) charting package.
All well and good, I started putting on some small trades, taking the signals from Updata charts. This started to work, but I still did not understand fully what I was doing. What I really wanted to be able to do was to read and define trend. That came with practice. Some trades were placed and were successful, recouping back the losses from earlier years.
After 2 years, I stopped subscribing to Updata as I wasn’t using much of what they provided and, instead, bought a licence for Bull’s-Eye charts. With Bull’s-Eye, you have to get the data and load it. But, it did teach me a lot, not least that not all data is useful. The big problem with Bull’s-Eye is that it is annoying to load data, so I needed something else.
I had to restudy P&F and adapt it to read candles and line charts. Then I could mainly use MetaTrader or any other charting package, including being able to look at charts via my phone. If further clarification was needed, I would export the data to Bull’s-Eye. This makes life easier as I can sit down and read any type of chart in most charting packages, with no indicators or special setups.
This could be anything: forex, stocks (U.K. / U.S.) or commodities. There are some great charting packages that can be used on a tablet, such as NetDania, JStock and MetaTrader. So, a lot is done from the tablet computer – mainly premarket. Then I sit down at the desktop. The methodology is mainly P&F, i.e. trading breakouts. I have learnt over the years to read a chart with P&F in mind, even though I could be looking at a candle chart. The reason being that P&F can crowd the plot area of a chart, particularly in 1 minute data, which I usually use as a trigger. Also, if you use P&F, then you are reliant on only a few charting packages.
To carry on the same… as I have routines now. I only drill teeth half a day a week. Trading can be very lonely, so this gets me out of the house.
There is plenty of rubbish talked about, i.e. setups that are based on indicators such as Stochastics and MACD. When, really, all that needs to be learnt is basic chart reading. Maybe I should publish a guide on T2W in the form of an e-booklet, explaining how to do it. It might put a few middlemen out of work! It’s just an idea at this point in time. It really means that most people with a bit of practice ought to be able to read a chart from any cheap tablet computer and be able to analyse it in order to obtain areas to trade from; all within a few seconds of seeing the chart. If you cannot do this, you need to practice a bit more.
Tips to pass on
1. Don’t load too much data on the chart.
2. Trendlines should be placed on the chart first, to carve it up into bullish and bearish sections. Oscillators and indicators should be applied to the trend only, and their inputs should be geared to the length of the trend, i.e. don’t put a 55 period EMA on a trend that has just begun from a consolidation.
3. Examine the last two to three trends for areas which look important. These could be horizontal areas of resistance and support (S&R), Fibonacci retracement levels and channels. From these easy steps you can achieve a lot.
4. Define the current areas of S&R, either from the levels already identified, or by technical levels that you’ve calculated, i.e. Fibs, pivots, channels and Gann etc. You need to practice to be able to get these levels within a few seconds.
5. A good tip which I learnt from bbmac is to do a S&R ‘roadmap’ premarket. Then there will be no surprises. Details of this are on his Comprehensive Trading System/Methodology thread.
6. Follow the trend. If you cannot see one, then the instrument is likely to be in a consolidation phase. If necessary, use a line chart.
7. Take great care with the plot area of any chart. You only need to show the trend you are following or the consolidation that price is waiting to break out from. Basically, learn to visually optimise the plot area of the chart.
Finally . . .
For anyone interested in learning more about reading P&F charts, I have a couple of threads on the topic: learning to read price action with p/f charts and Trading with p/f. Feel free to drop in and ask questions etc. – I’m happy to help if I can. Equally, if you have any questions or comments about points made in this article, please post them to the discussion thread that accompanies it.