Day Trading - What Do You Need?

[Edster]

Apologies for asking simple questions but it looks like this is where they're supposed to be asked.

I've been browsing this site now for just over a week. I'm new to all of the TA, technical terms etc so all of the information that I've been reading has blown my mind a bit but I've really enjoyed the read. I just want to learn more and more!

I've SB'd for 18 months or so but have been trying to read up a bit on intraday trading. It looks (on the surface) pretty good and there's no overnight worries, f you want a day off then nothing will be affected etc.

What I want to know is:-
1) What tools do you need (feeds, accounts etc.) - I already have a decent PC with broadband.
2) What running costs are involved (for the feeds that you need, commissions etc.)
3) To make, say, £250 a day - how much would I need in the pot (assuming an average daily success of 15-20 ticks)? [Yeah, I know that you aren't always successful but I'm just asking hypothetically]
4) Do you need to concentrate on the charts for the full 6 or 7 hours (assuming it's the DOW) or do you have time to pee!!

If anyone can answer these questions or at least point me in the right direction for further reading it would be appreciated. I've already printed off the 'Day Trading The DOW Jones' document but it's not totally 'newbie-friendly' when it comes to terminology.

My plan is to keep working and then, for a couple of hours at night and on days off (I work shifts) to day trade the DOW.

Thanks in advance,

Edster

P.S. When reading up on 'how to become a stockbroker' or something like that a few months ago I noticed that (on more than one site) it said that a background in telecomms is advantageous. Can anyone explain why?

 

[Roberto]

Hi Edster,

I've been making a living from trading (primarily SB) for over 4 years now, and I do intraday trading only (virtually never hold any position overnight) so I suppose I'd better try to give my answers to your questions. (I should perhaps mention that other people usually disagree with my opinions, and sometimes pretty strongly. I have absolutely no problem at all with that unless they're disagreeing rudely and without knowing what they're talking about - i.e. they've actually never done intraday spread-betting at all!).

It looks (on the surface) pretty good and there's no overnight worries, if you want a day off then nothing will be affected etc.

Absolutely. The key factor is not to be put off by people telling you it's the hardest way of trading, because that's just nonsense.

What tools do you need (feeds, accounts etc.)

You need reliable streaming live prices for whatever instrument(s) you're trading. If you're using TA then obviously you need to be able to display whatever it is you need to display on your streaming charts as well. Since you're talking about the Dow (which I don't trade a lot myself, but sometimes), I can recommend the "indices and currencies" package from www.ProRealTime.com. (You can't get the indices from them without the currencies). It's an excellent package, easy to use even for a non-computer-literate idiot like me, and costs 49 Euros per month. I switched to it a few months ago following the recommendations of others here, after using eSignal for a long time, and have never looked back. It's difficult to imagine that anyone could ever want more TA gadgets than they have, though I don't use most of them myself. For accounts, you need an account with CapitalSpreads, because they have the tightest spreads overall (I think) and definitely the best customer service. There are other SB companies of course (but keep away from Finspreads). There's an enormous thread on CapitalSpreads on these boards, in which their MD is a major participant, and it's _really_ well worth taking the time to read the whole thing (and that's quite a bit of time!).

What running costs are involved (for the feeds that you need, commissions etc.)

ProRealTime 49 Euros/month. CapitalSpreads no commissions, of course, just the spread (which is often smaller than the "direct access" commissions anyway, contrary to popular belief, unless you're dealing in individual shares in which case I'm told it's usually larger).

To make, say, £250 a day - how much would I need in the pot (assuming an average daily success of 15-20 ticks)? [Yeah, I know that you aren't always successful but I'm just asking hypothetically]

To make £250 a day out of 15-20 pips net profit (i.e. after the spread) you're talking about approx. £14 per point for spread-betting. What's your average stop-loss on each trade on the Dow? It can be a bit swingy but you're obviously looking for short trades with small targets and tight stop-losses, so let's guess it's a 15 pip stop-loss(?). That would mean you're actually risking £210 on every trade. That shouldn't be more than 2% of your bank (and some would even say 1%), which means your bank needs to be at least £21,000 (or at least £42,000 if you're working on a 1% risk per trade basis). Sounds a lot? Yes, it always does. But you're talking about making £1,250 per week, otherwise known as £60,000 per annum TAX FREE, so obviously you need plenty of capital to start.

Do you need to concentrate on the charts for the full 6 or 7 hours (assuming it's the DOW) or do you have time to pee!!

Frugi's probably the man to answer that one, not because he's naturally gifted at taking the pee, but because he's naturally gifted at trading the Dow, I think. It depends what sort of set-ups you're looking for. What some people do with the Dow is limited to trading the first and last hours and checking for reversals at key times like 9.42, 10.00 and 3.00 (EST), so they can spend most of the day in the loo if they want to, I suppose. Others wouldn't dream of trading the first or last hours and have completely different ideas. How long you have to look for depends on the frequency of what you're looking for, in other words. (Do you have a _really_ clear picture of exactly what set-ups you're looking for? Don't start with real money until you do!).

I've already printed off the 'Day Trading The DOW Jones' document but it's not totally 'newbie-friendly' when it comes to terminology.

So did I, a while ago ... but I ended up more or less deciding to do mostly forex instead. I don't mean it rudely, but if you're not familiar with all the terminology (such as the rightly celebrated "Chartman Gamble Entry"!) are you sure the Dow is the thing to trade? I understand that the hours suit you, but there's the S&P as well, you know, and some other things too.

If you're looking for very flexible trading hours, might it be an idea to think about forex, perhaps? A bit different, I know, but currencies often trend nicely and it might be worth a thought.

a background in telecomms is advantageous. Can anyone explain why?

I have no idea. Will be interesting to see the answers!

IMHO, the essential thing is NOT to start doing this with real money until you're totally clear about your aims, plans, set-ups, entries, trade-management, position-sizing, stop-losses, exits, and success rate tested over a long period of various different "market moods and behaviours". And NOT until you've done plenty of "paper trading" first to forward-test it all. And NOT until you've become fully familiar with the trading platform and execution by using "play money", e.g. on the demo account facility at CapitalSpreads.

Good luck.

 

[Edster]

Thanks for the reply Roberto. I've already opened a demo account with Capital Spreads. It certainly looks better than my current company (tighter spreads and internet executions).
My questions were aimed more at Direct Access but spread betting is what I'm familiar with so it's worth considering. Isn't it more difficult to intraday spread-bet though due to the larger spreads?
I haven't decided definitely on the DOW yet but have read about it on this site and it sounded OK. I'm open to other suggestions (e.g. S&P etc).
If people wouldn't mind posting the pro's and cons of whatever they trade in then I can maybe narrow it down a bit.

Thanks,

Edster

 

[Roberto]

Isn't it more difficult to intraday spread-bet though due to the larger spreads?

Not necessarily: depends what you're trading. I've never traded the Dow by anything other than SB (and not all that much of it anyway, I did mostly the Dax) so I don't know; sorry. I imagine that you'll be right, and that if you're planning to concentrate on just one market (perhaps a very good thing to do), direct access will work out better. Others who know more will reply, I'm sure.

I'm open to other suggestions (e.g. S&P etc).

I know there's a lot of information about day-trading the S&P on the internet, and quite a few books about it too. Presumably about the Dow also. I think I've probably outlived my usefulness in this conversation!

 

[Edster]

I know there's a lot of information about day-trading the S&P on the internet, and quite a few books about it too. Presumably about the Dow also. I think I've probably outlived my usefulness in this conversation!

Thanks Roberto.
Can you or anyone else recommend a book or two?

Cheers,

Edster

 

[LION63]

Edster,

The charts you use for trading the DOW should be provided by the spread bet firm as they will be more accurate for your purposes. Using charts provided by third parties will not necessarily reflect the quotes you see as they will be based on the futures or cash price. This is a common error made by most traders and whilst it might not make a major difference, you need to ensure that there are very few chinks in your armour.

As Roberto has said, the time you spend by the computer will be determined by your trading strategy and the number of points you wish to obtain of each trade. Taking a trip to the loo should not present a problem unless you fall asleep and you do not have a stop in place, in which case - the s*!t may hit the fan.

 

[jackal007]

Deal4Free and ProRealTime Data

Dear Roberto

I did some research on SB companies some time ago looking at spreads etc, but I found Deal4Free to have the tightest spreads combined with online execution. Even their software looked good. Any comments you have on this company compared to Capital Spreads would be appreciated.

I also checked out ProRealTime, but judging by their website it looks as though they do not offer a FTSE-100 feed with futures data? Do you know if they provide FTSE cash data feed and FTSE futures?

Do you trade any of the indexe's or do you stick to forex?

jackal007

Hi Edster,

I've been making a living from trading (primarily SB) for over 4 years now, and I do intraday trading only (virtually never hold any position overnight) so I suppose I'd better try to give my answers to your questions. (I should perhaps mention that other people usually disagree with my opinions, and sometimes pretty strongly. I have absolutely no problem at all with that unless they're disagreeing rudely and without knowing what they're talking about - i.e. they've actually never done intraday spread-betting at all!).

Absolutely. The key factor is not to be put off by people telling you it's the hardest way of trading, because that's just nonsense.

You need reliable streaming live prices for whatever instrument(s) you're trading. If you're using TA then obviously you need to be able to display whatever it is you need to display on your streaming charts as well. Since you're talking about the Dow (which I don't trade a lot myself, but sometimes), I can recommend the "indices and currencies" package from www.ProRealTime.com. (You can't get the indices from them without the currencies). It's an excellent package, easy to use even for a non-computer-literate idiot like me, and costs 49 Euros per month. I switched to it a few months ago following the recommendations of others here, after using eSignal for a long time, and have never looked back. It's difficult to imagine that anyone could ever want more TA gadgets than they have, though I don't use most of them myself. For accounts, you need an account with CapitalSpreads, because they have the tightest spreads overall (I think) and definitely the best customer service. There are other SB companies of course (but keep away from Finspreads). There's an enormous thread on CapitalSpreads on these boards, in which their MD is a major participant, and it's _really_ well worth taking the time to read the whole thing (and that's quite a bit of time!).

ProRealTime 49 Euros/month. CapitalSpreads no commissions, of course, just the spread (which is often smaller than the "direct access" commissions anyway, contrary to popular belief, unless you're dealing in individual shares in which case I'm told it's usually larger).

To make £250 a day out of 15-20 pips net profit (i.e. after the spread) you're talking about approx. £14 per point for spread-betting. What's your average stop-loss on each trade on the Dow? It can be a bit swingy but you're obviously looking for short trades with small targets and tight stop-losses, so let's guess it's a 15 pip stop-loss(?). That would mean you're actually risking £210 on every trade. That shouldn't be more than 2% of your bank (and some would even say 1%), which means your bank needs to be at least £21,000 (or at least £42,000 if you're working on a 1% risk per trade basis). Sounds a lot? Yes, it always does. But you're talking about making £1,250 per week, otherwise known as £60,000 per annum TAX FREE, so obviously you need plenty of capital to start.

Frugi's probably the man to answer that one, not because he's naturally gifted at taking the pee, but because he's naturally gifted at trading the Dow, I think. It depends what sort of set-ups you're looking for. What some people do with the Dow is limited to trading the first and last hours and checking for reversals at key times like 9.42, 10.00 and 3.00 (EST), so they can spend most of the day in the loo if they want to, I suppose. Others wouldn't dream of trading the first or last hours and have completely different ideas. How long you have to look for depends on the frequency of what you're looking for, in other words. (Do you have a _really_ clear picture of exactly what set-ups you're looking for? Don't start with real money until you do!).

So did I, a while ago ... but I ended up more or less deciding to do mostly forex instead. I don't mean it rudely, but if you're not familiar with all the terminology (such as the rightly celebrated "Chartman Gamble Entry"!) are you sure the Dow is the thing to trade? I understand that the hours suit you, but there's the S&P as well, you know, and some other things too.

If you're looking for very flexible trading hours, might it be an idea to think about forex, perhaps? A bit different, I know, but currencies often trend nicely and it might be worth a thought.

I have no idea. Will be interesting to see the answers!

IMHO, the essential thing is NOT to start doing this with real money until you're totally clear about your aims, plans, set-ups, entries, trade-management, position-sizing, stop-losses, exits, and success rate tested over a long period of various different "market moods and behaviours". And NOT until you've done plenty of "paper trading" first to forward-test it all. And NOT until you've become fully familiar with the trading platform and execution by using "play money", e.g. on the demo account facility at CapitalSpreads.

Good luck.

 

[twiggytwo]

Hi Roberto, I see you say in your post to Edster to keep away from Finspreads .
can you give your reasons for this please ?
best Regards

 

[twiggytwo]

Hi Edster,
Hope this is of help to you, with regards your tools Q.
You need more than one screen and a sky TV feed with CMBC on, if you have the spread betting live prices showing on screen (1) ( they will change as the market moves )and you can trade from this screen ) on screen (2) you have your software with your tech set up with your live feed , and on your TV screen (3) you will be able to see the CMBC with futures movements before the market opens and live movements when the market is open and also key info at 1-30 UK and 7-15 UK times I use this to S/B the DOW ONLY, this is not the best Index for a Rookie as it can move fast so use the the S&P 500 , also I dont really think you are a Rookie?
Best regards

 

[BroadSword]

I did some research on SB companies some time ago looking at spreads etc, but I found Deal4Free to have the tightest spreads combined with online execution. Even their software looked good. Any comments you have on this company compared to Capital Spreads would be appreciated.
jackal007

Having used both Capital Spreads and D4F, I am strongly of the opinion that CS are miles ahead. Customer service is exceptional, whereas it is non existant at d4f. Spreads on major markets are just as good.

BTW, Roberto, excellent post, so much good advice there!

 

[Roberto]

I did some research on SB companies some time ago looking at spreads etc, but I found Deal4Free to have the tightest spreads combined with online execution. Even their software looked good. Any comments you have on this company compared to Capital Spreads would be appreciated.

I don't, I'm afraid, because I've never used them. The reason for that is that I was very put off by reading many comments here and elsewhere about their allegedly awful customer service. The impression I got was that they're ok until anything goes wrong (which it inevitably does at some stage if you put through a reasonable volume of trades) and then they have absolutely no interest in discussing it, trying to put it right, or retaining their customer rather than losing him. All hearsay, of course, but enough of it to have influenced me.

I also checked out ProRealTime, but judging by their website it looks as though they do not offer a FTSE-100 feed with futures data? Do you know if they provide FTSE cash data feed and FTSE futures?

They don't, as far as I know. So they are useless for anyone wanting to trade the FTSE-100 index or shares of FTSE-100-listed companies. I suspect that the reason for this is that the feed from the LSE is several times more expensive than that of any other market, and they've decided to keep the cost down and market themselves by being a fraction of the price of eSignal for an otherwise very similar (but perhaps rather more reliable, broader, more flexible and more user-friendly) product.

Do you trade any of the indexe's or do you stick to forex?

At the moment 80 - 85% forex. But I can't altogether keep away from indices. I started off trading the Dax and the FTSE (only) over 4 years ago and I can't altogether wean myself off them, apparently. The FTSE effectively disappeared for me when I switched from eSignal to ProRealTime, and I don't miss it at all. I've actually traded the Dow a bit yesterday and today (not bad days to be involved!), but mostly forex. I think that the nature of several indices has changed a bit over the period that I've been trading, and probably my old methods just don't work so well any more. Also I think I'm right in saying that there's generally quite bit less volatility in the indices now than was, say, a year ago? Currencies often trend nicely, which suits me.

Hi Roberto, I see you say in your post to Edster to keep away from Finspreads . can you give your reasons for this please ?

Well, it's personal opinion only, obviously. I had some shockingly bad experiences with them (which I honestly don't want to go into in any detail, if you'll excuse me) and so have a couple of other people I know. I also once had a long telephone conversation with one of their directors (eventually!), left the conversation absolutely appalled and dismayed at their apparent intransigence and inflexibility and have never used them since. But obviously I recognise and respect that other people's experiences may be very different from mine.

 

[twiggytwo]

Hi Roberto, thanks for the reply, about keeping away from Finspreads Q.
I had a problem with them about a year back, and after getting the run around on the phone for some days and weeks and thinking to close my account with them. I sent an E mail to the Managing Director in large print with a wake up message and my phone number.
Give credit due , he phoned me and we had a conversation about the problem, he said it was being sorted, and four days later the problem that had been ongoing for three months was put right. I have not had a problem since and have used them now for over three years.
The only fault I find with S/B Companys is that when the market is about to move or is moving fast they will pull the plug and say that they have lost their feed !
If they do this I use the phone and they have to give you a price and you can deal, I never wait and sit frozen hoping the feed will come back as this is not streetwise.
Your post was spot on and very helpful , I use 0.925% for trade size and only trade the Dow, I see the next step up to be to 10,891 then a possible consolidation around this level ( this is not trading advice just my analysis of the the Dow )
Thanks again for your very helpful post.
Best Regards

 

[badgerbadger]

The question regarding telecomms, has actually been posed wrong. If you wish to be a Stockbroker, it is highly advantageous if you come from a telephony background, eg: telesales.

Why? If you need to ask this question, Im not sure your really familiar with what a Stockbroker does. They are like window salesman, just have a slightly more glamorous product to pitch you. Being a trader and a broker are two very very very mahusively different jobs.