A suggestion for daytraders

kevin546

Established member
699 0
Subject to your style of daytrading the common factor will probably be that most will close before the end of a session and some will hold on from a positional trade.

The majority will accept smaller price moves not intending to run with the daily trend but come back tomorrow with the attitude tomorrow is another day and there is nothing wrong with that. It is what works for the individual that counts.

My suggestion refers to those who are not scalping for 1 or 2 points but more from the intraday trends.

To give yourself more of a chance why not consider the idea of locking in early profits with a % of your stake. When I place a trade I know from my set-up that I will usually get some profit, how much I do not know unless I have a pattern or resistence/support to guide me. When trading during the day and in my case the FTSE the most common target profits are 5 and 10 points. Obviously much more can be on offer but because these are lower values they are seen more frequently.

In this case one could lock in profits at 5 or 10 then leave something to run on. By diluting your open position in this way allows you the opportunity to manage a trending move further along its path without the worry that it may all evaporate without anything to show for it. As the 5 points is seen first you could also consider placing a higher % on the 5 points so that this becomes a worthwhile return in its own right. The same could apply to the 10 point position.

This will then leave a further % to run its course.

Having this approach means that when it does not work out and fails after the 1st target is locked in you are less likely to come away with a loss, bolstered by the early profit which in this case is another risk management tool to safeguard your main deal of hoping for a nice trend to return a larger profit.

It also helps when a trend does not appear but only moves in a narrow range of 10 - 20 points, this system will allow you to profit in such circumstances rather than trying to second guess the market.

It will not suit experienced traders who can monitor a trade and deal with it from a single view point. Having pre-determind targets will help emotional trading but does reduce your overall profit because you dilute your position compared to trading in a single amount. It is the price you have to pay for a bit more safety. Someone experienced though will probably not need to go down this path.

But at least you know low targets will come again day after day which can make a good return without a large amount of capital, especially if using SB for your trading.
 
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mmillar

Guest
330 5
lol. Have you started your christmas celebrations already?

Remember the rule...

'Don't drink and post'
 

mmillar

Guest
330 5
Yes. Have family out here so staying put. Beautifully warm and sunny, but it has snowed up on Tiede (the volcano). So off to build snowmen and have snow ball fights with my nephew and niece. :) Off to a party now.

Happy Christmas.

p.s. let's hope Kevin sobers up and realises what he has posted before the mods get him for drunk posting. :)
 

timsk

Legendary member
7,374 2,164
Kevin,
Makes excellent sense to me, and I intend to do just as you suggest from now on.
Cheers,
Tim.
 

kevin546

Established member
699 0
Tim

Thank you and I wish you good luck. I have been applying several different approaches but overall I think the best example is a 2 : 1 :1 ratio. In other words suppose your normal trading amount is £20 per point or 2 contracts.

Dilute this as follows (using the example on the FTSE re targets)
£10 on 5 pts = £50, £5 on 10 pts = £50 and £5 on trend which obvioulsy could be + or - second and in some cases (in a fast moving market) the first target. The weighting of the first profit is equal to the amounts remaining in the market which means as soon as 5 points is locked in for this deal to now become negative overall is not your entry level but - 5. This would allow you more scope for you to benefit from a trend and not get caught out by a whipsaw.

I am sure we have all experienced at some time in our trading where we enter ona signal start to get some paper profit only for the market to turn and move negative. Often we could come away empty handed or with a small loss. Then the price changes again and hey presto you were right all along. Only problem now is do you have the confidence to get back in again. Using the method I suggest is not the answer to all market problems but I think it could help to give you more of an edge.

I feel it can be adapted for any instrument and any time frame the only requirement being that for different instruments and time frames you will require a very good knowledge of what target level to set. However its not really brain surgery for the daytrader. Most indicies will fall into a similar level of points as I ave suggested simply because they are the first to be reached. I accept in the case of the DOW or ES this would need to be amended but I am sure you understand what I am trying to illustrate.

From now on whatever time frame I trade I will always look to trade from at least 2 levels for the extra safety and flexibility it provides, IMHO.
 

TheBramble

Legendary member
8,395 1,170
kevin546 said:

[...]
In this case one could lock in profits at 5 or 10 then leave something to run on.
[...]
But at least you know low targets will come again day after day which can make a good return without a large amount of capital, especially if using SB for your trading.

Kevin, I think the idea of taking some of your profits off the table makes sound psychological sense. But I'm not sure how you could make a 'useful' profit from 5-10 pts/day on the FTSE - especially with SBs.

Even the lowest spread I've seen of 4pts would make the trade marginal at best on most days - discounting those where it trends and you make a stack more on the residual amount left in the trade.

Which SB are you using where the spread becomes less of an issue?
 

kevin546

Established member
699 0
Tony

I mentioned SB as the funds required are less and it provides traders the opportunity to practise without risking to much capital. For best spreads on the FTSE you will do better with a direct access broker on futures with a spread of between 0.5 - 1.5 pts most of the time. But the lowest amount you can trade with is 1 contract which = £10 a point. Not ideal for someone who is new to trading, particularly daytrading.

As for SB spreads the best you will get is 3 with either CMC (D4F) or CapitalSpreads.

I am not relying on 5 or 10 points a day. That was just the suggested amount for closing early profit with the 1st half. For instance this morning the FTSE was in a narrow range again and on D4F the range had only been 20 points. With a 3 point spread that makes it difficult to get much. However I did deal this am on one deal and took 5 points and 8 on making a total of 13 points from that particular trade.

The concept is to trade the intraday swings and with each deal I look to take 5 points with the 1st half and the remainder to run with that particular trend. In fact with the FTSE daily and monthly daily average range are continuing to reduce (Monthly daily range held around 47 for about 3/4 months but Dec saw it move down to 38 and this month at the 1/2 way stage it was 36 and since then we have had 2 more low days) it is for this reason that I am now considering adding another target to my trading with the view of taking 5, 10 and trend. This will help to increase the points while still being able to trade for short periods in narrow ranges. Take my deal today as an example from that deal I would have managed 5, 10 + 8 if I had traded with that method making 23 points. The reverse that followed my deal offered 5 and 6 as did the next. That would have taken you up to lunch and a total of 13, 11 & 11 from 3 swings = 35 points.

The system works and it just depends how much time you are prepared to commit yourself to before your screen. However mosts days there are between 3 - 6 swings. But if you consider a day with 4 swings playing it safe and only going for the 5 points rather than the trend produces 20 points. I am not suggesting this just illustrating how the points can add up. Add on to that those deals that produce +5 and you can see how it starts to grow, even though you may not be reaching 10. For example lets assume as in today there is no decent trend and it is sideways within a 20 point range. Each deal you take never gets further than 7 or 8 points and by the time that trending movement is over you have 5 points to close the full deal. On that basis you would get 1st half = 4 x 5 + 2nd half 4 x 5 = 40 points.

Most days you will get positions that produce reasonable points this morning managed to go over 10 and after the rise failed the FTSE open up some with the US and has offered close to 20 points for the 2nd half of a deal. When you break the days trading down you will often find the opportunities are there to lock in good points. As I said earlier it depends how long you are willing to spend in front of the computer as to how much you can make and how long you can remain focused and disciplined.

It does not have to take up the complete day as with most systems you can apply it at the best times such as the 1st few hours and the last few but if you see the complete day out then the points can really add up with about 6 deals for the day.

There will be times when you get less than 5 and also take a loss but if your dealing is selective and thoroughly tested this is just one way of managing your intraday open position.

I use CMC/D4F

Kevin
 

darrenf

Well-known member
481 3
Just a quick thought to those struggling to find range on FTSE 100 at the moment.

Have you ever considered day trading fx?

On eur/usd for example, daily range is usually 100 to 150 points and cmc spreadbet have a spread of 3, capital spreads 4. A better trading proposition than ftse 100 at the moment?

Most of the daily range is traded within UK trading hours.

Conforms to basic TA pretty well.

If you like the sound of it, check out the forex threads on here.
 

TheBramble

Legendary member
8,395 1,170
Kevin, take your point about using futures with DA to keep the spread low. (BTW When you talk about DA I always assume it's a NASDAQ 'thing', but presumably there are DA facilities for UK stocks & indices too?).

Also, the possibilty of multiple turns per day would help to produce some quite reasonable profits - I was thinking of it just as a one-per-day type trade.

Darren - 100-150 pts on FX and adheres 'pretty well' to TA. SOunds like a good deal. Presumably (see above query on DA) this can be via a DA link as well?
 

kevin546

Established member
699 0
Darren

Agree re FX range and may give this some attention. I have always held the belief that it is better to focus on one instrument so that you come to know it well. Then learn how you can trade it effectively on any given day. That takes time and effort. I believe I have that with the FTSE and can trade it from different strategies both intraday and short to medium term.

In its present state the one upside is that you have time to make your decision but I do take your point re FX. Probably that and the FX are responsible for the possibility of money moving away from the FTSE to these instruments. I have not looked into the volumes but as these instruments appear much more volatile maybe they also have greater interest. I am happy to plug away at the FTSE but if it does start to go below 20 points a day then I might join you over at FX

Bramble

check out www.interactivebrokers.co.uk provide direct access futures on most exchanges around the globe and would expect them to cover FX. As Darren has already said D4F have a 3 point spread and as it can move in excess of 100 points in a day quite easily the spread is not a problem.
 

JonnyT

Senior member
2,560 22
The EUR/USD globex future has a spread of 1 generally, is $12.5 per pip (a point in FX language) costs $2.40 per side with IB.

The thing moves and is liquid during Londons normal opening hours.

It normally trends in the morning and then after US news at 13:30.

Boy can this move. The range is terms of spread is probably as good as it gets. I only now trade Forex through IB

You must be mad to trade FTSE.

JonnyT
 
 
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