Beginners help

[anissut]

Hi Guys,

This is my first post on this board so please be gentle with me. First of all a brief history of how I have attempted to spread trade over the last 2 years or so, what tools I have used, what mistakes I have made etc.

I first got into Spread Trading a couple of years back. I confess I had no idea what I was doing and basically gambled money with no idea what I was doing. I then met someone who seemed to be trading successfully. He gave me a copy of Omnitrader and I subscribed to Sharescope. Using MACD, RSI and Williams indicators I started off with equities. I was doing ok at max £5 a point. I wasn't making big amounts obviously but I was still up and it was giving me a confidence boost as I assumed that the buy and sell indicators that Omnitrader and Sharescope were giving me as well as my research of the 3 indicators above seemed to be giving me a 70% hit ratio. I had and still have no idea of all these terms that you all seem to go on about on this board such as TA and CCI etc. I am not able to look at a chart and see when I should enter or exit. Anyway I got a little cocky and decided to try and trade the indices. BIG mistake, as all the gains I made got wiped out in 1 day of Wall St.

Now I want to do this properly. I have a job where because I can delegate a lot of my work I can spend a reasonable amount of the day putting effort into trading. I would love to be able to trade the daily DOW or the daily FTSE. I have no huge expectations I just want to supplement my income a little. I have seen all this stuff about Sierra Charts, My Track, Esignal etc. but I am not sure I could utilise them properly and as a result do not want to waste money on these products. I have 3 accounts open with Cantor, City Index and Capital Spreads.

I have looked at Stu Whisson's stuff at insight support and am very tempted but thinking logically, there has been some negative (and positive as well) feedback regarding his training etc. And again I don't want to just throw money away. I have also seen "aussietrader's" book "Principles of Profit" and I am very tempted by this but again the thought of losing the money with absolute no reward worries me.

Do any of you wise people have any advice for me on how I can progress further?

Thanks,

Anis

 

[andrewmooton]

Hi Anissut,

Im no expert but I believe that spot forex is alot easier to trade intraday with an SB company than are the indicies, and more potentially profitable.

HTH

 

[stevet]

"Im no expert "

you can say that again - nothing is easier to trade with SB companies,

and indexes are way way easier to trade than forex - but a forex trader is not going to cross over to indexes - and vice versa - and guess what - i dont know diddly about trading forex - but i know how to trade indexes

and books are written by people who are not traders and just out to make a buck from writing a book - having said that - i was pretty negative to aussietrader and he was very friendly in return - so if you give your bucks to anyone - give it to aussietrader as he seems like a nice guy and if someone is going to enjoy your bucks - it might as well be him

the only way to learn is to immerse yourself in trading 24hrs a day - 365 days a year until the you start to see whats going on - and just look at pricing moving day in day out - thats being done by others who know what they are doing - so figure out why they are doing it

in markets - no one knows - you dont need all the answers - just enough to get by

 

[FTSE Beater]

Hi Anissut

Welcome to T2W

I had and still have no idea of all these terms that you all seem to go on about on this board such as TA and CCI etc.

A list of the terms we use can be found in the T2W Glossary

would love to be able to trade the daily DOW or the daily FTSE.

May I ask why you would want to. If you had/have success with trading shares, then why would you want to switch?

 

[Buk]

well, I guess you could have done worse than to mosey into a trading camp such as this! - welcome!!....why not have a look at one or two of the beginner threads (at the start of each topic). Try pick a journal or two which relates directly to trading/charts/price action instead of the "show me/do it for me" books......if you want to start attempting to interpret your own take on price action etc, then have a read up on the basics of T/A from the various online sources :

http://stockcharts.com/education/

http://www.chartpatterns.com/

http://www.incrediblecharts.com/

http://www.investopedia.com/articles/technical/

it really is only hard graft, dedication, determination etc.....the more you learn, the more you want to. Try studying one or two common chart patterns & practice observing them on different time frames, get to really know the set ups. Pick an instrument/candidate that you feel comfortable with & study it's behaviour/how price reacts at various time cycles. Don't become distracted with attempting to immerse yourself in too many instruments to start with.

It really is difficult to know where to start sometimes but take your time & have a good scout around these threads!

http://www.trade2win.com/boards/showthread.php?p=125574#post125574

the above is a decent thread highlighting one or two links to basic price bar/candle information!

hope some of the above helps! - and good luck

 

[anissut]

Ok, having read your posts I need to mention a few further things.

Firstly, FTSE Beater, I have read some of your threads re: reading graphs and when to enter and exit trades based on the charts. I found it very useful but you were doing it with a 60 min delayed chart right?? Can you use the same principles on a chart based on 2-3 months where obviously your profit/loss would just take longer than if you used your intraday chart?

Also, the biggest problem is the spread that the SB companies offer. For example AstraZeneca has a 20-22 point spread on Capital Spreads and Cantor. So if I was to sell the December future short, I need the share to go down 20 points first before I even break even???? Which means I may be making a correct call but doesn't mean I'm making money.

I have also read a post on this board re: trading the Dow daily. It was vey interesting but I guess it takes time to read a chart and predict the next move on it. It all makes sense when someone posts a graph which has already occurred when you can say to yourself "ahhhhh, yes, I see now, that is the entry point, that is the exit point" but in reality when its in front of you its not so easy.

My next issue would be to have the software to learn this. So you pay your money and you have a live chart in front of you. You then set the graph correctly so that you have all the info in front of you. You look at it you then s**t yourself and in the meantime you are pi$$ing money away on your monthly subscription and possibly making wrong trading decisions. BUT I also get the impression the only way to truly learn is to have that live chart in front of you.

All this stuff is giving me a right headache I tell you. But I need to keep persevering and it would be great to get help from you guys.

Thanks.

 

[anissut]

Ok, I have paper traded 4 stocks so far. Using Sharescope (end of day), using 2-3 month charts, candlestick with trend lines and with Williams, RSI and MACD indicators. I sold Astra Zeneca at 2633.20. I have already closed that with a 20 point profit. I have also sold HSBC at 878.80 and HBOS at 714.30. Yesterday I sold the FTSE Sept. Future at 4570.50 and closed it this morning at 4544.00. Thats a 26 point profit. I bet £10 per point which is probably what I would do in real life. So thats a 46 point profit in 24 hours which £460 which I have got excited about. Now, I know its probably beginners luck and I may be reading the charts completely wrong but its not a bad start I guess.

 

[stevespray]

anissut....

A couple of points.....

Many people fail at this. Ask yourself why this is so. Personally I believe that there certain reasons which make people sure to fail. The obvious ones are mentioned everywhere you look. Over trading / failing to cut losses / always closing winners too soon / over committing capital to one position etc.

FTSE Beater makes one of the most important points which you would do well to learn. You have stated that "You want to trade Dow" and he has asked you why. You have not answered his question yet.
He has suggested that you might do well to continue to trade stocks if you are good at it. I agree with him. For some reason there is a perceived glamour in trading the big US Futures - I would liken it to playing in the posh rooms at the back of the big Las Vegas casinos. One of the biggest mistakes people make is choosing a market and then saying 'lets play it'. The real art of trading is to detect markets which are doing what you want them to do already. If a stock is already in an uptrend then there is already a greater than 67% chance that the next day will be up. Use stats like that to your advantage. Different stocks have differnet characteristics - spot the ones which suit your trading style. Always keep you eyes open for new stocks which maybe exhibiting 'friendly signs' and don't be too loyal to 'old friendly' stocks which are now exhibiting a more un-friendly nature. Choose well and the job is much easier. Get drawn into trading things like the Dow and you'll get badly burnt.

Good luck,
Steve.

 

[anissut]

Steve,

Thanks for your advice. I think part of the reason why I want to trade the daily Dow or FTSE is purely because (and this sounds very naive and dangerous) if I am able to do it one day (I am not saying tomorrow as I am nowhere near experienced enough) then the financial gain would seem to be better. Where the Dow or FTSE can move upwards/downwards of 50 points without any problem the same cannot be said of a share. I guess its impatience.

But how about a future Dow or FTSE? Ie: in todays terms the December Future? I think the charts can give you some sort of indication where the indices may go in a few weeks rather than one specific day. Would that be a fair assumption or am I way off the mark. The main purpose of me being here is to learn from people like yourselves who seem to have much experience and a lot more knowledge than I do. I don't want to skip the learning phase, because I want the knowledge so that I can make more of my own decisions with confidence.

I think my biggest mistake is that when I see a stock rise or fall quickly, my mind tells me, well it must fall soon. So today for example Astra Zeneca last time I looked was down around a 100 points. My brain told me, buy buy buy. Whether thats wrong or right, is something I am not able to trust. As you pointed out if a stock is in an uptrend then there is a 67% chance the next day it will be up. If thats true then the same works on a down trend right? I know there is so much that you can read into that but I am merely trying to explain the mindset involved. There are hundreds of factors to prove to me that my decision making is wrong but those are the hundreds of factors I want to learn about. The problem is which ones do you start with, which ones are more important than others etc.

Excuse the waffle.

Anis

 

[stevespray]

Waffling is good - its raw thought process which can be examined.

Your point about AstraZen is a good one. Lets look at it. Basically what you are saying is that human nature, instead of making you say "My god, down 100, that must be a good trend" says to you "It's down 100 so at some point it must bounce". The rookie chancer then follows his nose and takes the 2nd option, while the experienced dealer sets about establishing a sensible point to enter the down trend.

The same is true of people who cost average positions which are against them. Instead of admitting they are wrong they double their exposure and turn to a mixyure of prayer and hope. Of course, if the position went in their favour from the outset they'd never consider adding to it, they only do that to trades which are going wrong !

You say "Where the Dow or FTSE can move upwards/downwards of 50 points without any problem the same cannot be said of a share".......This is not so. You should try looking at some of the US stocks. There are some lovely intra-day trends which yield loads of points. You should take a look. Dont limit your boundaries of interest before you have carried out your enquiries. You may find it useful to read a number of the threads created on this subject by Mr Charts. He trades US stocks and keeps amazingly tight stops whilst appearing to benefit from terrific moves when he's right.

To my mind, the movement of Indicies appears much more random. A good way of locating some good stocks to trade is to locate trend following stocks. You can do this with ease. Find and index / sector / industry which has a strong chart. The look at the stocks which make up that sector. Pick the best trending stocks from a sector which is trending and you will find it much easier to follow them and hopefully with a far lower number of whips.

Steve.

 

[stevespray]

PS Take a look at the index DJU - It's the American Dow Jones Utilities index. I've been trading a number of those stocks of late. It's been very strong consistantly making new highs for the last 3 months. It's currently at highs not seen since mid 2002. All statistics I grant you but they're not marginal.

Steve.

 

[FTSE Beater]

Firstly, FTSE Beater, I have read some of your threads re: reading graphs and when to enter and exit trades based on the charts. I found it very useful but you were doing it with a 60 min delayed chart right?? Can you use the same principles on a chart based on 2-3 months where obviously your profit/loss would just take longer than if you used your intraday chart?

Yes, the same principles applies, no matter what time-frame your trading in. I personally believe this is why chart reading has become so popular - because it works pretty much on all markets, in all time-frames

Also, the biggest problem is the spread that the SB companies offer. For example AstraZeneca has a 20-22 point spread on Capital Spreads and Cantor. So if I was to sell the December future short, I need the share to go down 20 points first before I even break even???? Which means I may be making a correct call but doesn't mean I'm making money.

20-22 points
That's daylight robbery. Deal4Free and Finspreads have about a 2-3 point spread. It's wider in the first 10 minutes of trading, but it soon settles down.

I have also read a post on this board re: trading the Dow daily. It was vey interesting but I guess it takes time to read a chart and predict the next move on it. It all makes sense when someone posts a graph which has already occurred when you can say to yourself "ahhhhh, yes, I see now, that is the entry point, that is the exit point" but in reality when its in front of you its not so easy.

Yes, it is different seeing things in hindsight to actually trading them their and then.

My next issue would be to have the software to learn this.

If you mean what software to use for the Dow, then just use BigCharts for a start. If you mean which software for UK stocks, then Sharescope is the best around.

Thanks for your advice. I think part of the reason why I want to trade the daily Dow or FTSE is purely because (and this sounds very naive and dangerous) if I am able to do it one day (I am not saying tomorrow as I am nowhere near experienced enough) then the financial gain would seem to be better. Where the Dow or FTSE can move upwards/downwards of 50 points without any problem the same cannot be said of a share. I guess its impatience.

That's not quite correct. Yes big money is to be made on futures, but their is also a lot of money to be made trading shares, otherwise the share markets wouldn't function. I have to be honest and say your love for the Dow and FTSE could be your down fall - Fear and greed drive the markets, and they are the things to be very wary of.

I think my biggest mistake is that when I see a stock rise or fall quickly, my mind tells me, well it must fall soon.

I remember the trader Alan Farley telling me that "The top of the charting page is not resistance, and the bottom of the charting page is not support" - very wise words

Thats a 26 point profit. I bet £10 per point which is probably what I would do in real life. So thats a 46 point profit in 24 hours which £460 which I have got excited about.

WOW!! How much trading capital have you got. Never risk more than 1-2% of your trading capital on one trade. So say you have a 10 point stop and you bet £10 a point, you would really need about £10,000 in your account.
If you risk 10% of your trading capital, and you have 3 losing trades, your down about 30% which is very difficult to get back. 3% loss however is easily recoverable

Sorry if the above sounds harsh, but it is vital you know this.
If you ever want help reading a chart, post a charting image with your analysis on it, and I'm sure we will be able to give you some advice.