First EOD Trade…

[SoldierOfOne]

…soon I hope.

Speculative request for some help, please. Am very new to (potentially) trading and seem to be sinking under a mass of information from some excellent posts on this board. I think I need to reign in some of my reading and concentrate on a few of the basics… not sure how to place a first trade – I’ve opened a virtual account with Tradindex.

Does anyone have some wise words as how to say place an EOD bet on say RBS? (thought about getting to know one share or index really well)

Do many trade EOD? Do you have a portfolio of volatile shares you monitor?

I also currently learning TA – (am reading the Investors Guide to Charting by Alistair Blair, before looking to move onto John Murphy’s ;Charting Made Easy’) and was wondering what tools to use.

For RBS (or any share/index), where is a good place to get a (free) chart from?

Does anyone have examples of their first trades they would care to share?

I’m also interested in the idea of Tea Time Traders (of the DOW ?) but cannot find any posts relating to them/discussing this. Can anyone help?

I work during the day and am keen to play with some virtual money as I begin with reading (including FTSE Beater’s excellent thread) as I believe this will help in my understanding i.e. putting what I read/research into practice.

Well, thank you for getting this far.

SoldierofOne

(Having read through the above …it seems a bit jumbled up; a bit like my brain, as I trying to let everything soak in!)

 

[Kaffee]

Well I'm very new to this trading lark, but here's my take on it...

CityIndex have just launched a virtual trader application on their site. I beleive you are "given" a nominal 10K to begin with. See how long it takes you to blow that !!!!

As for RBS.. yep, it's a good share to begin with. 70 pt moves are not unusal. My current, unrefined, back of a fag packet look at a chart suggests long below 13.60, short above 14.70. Hover I would avoid becoming a one trick pony... best learn the techniques and then apply them across other shares, indices, sectors.

With the banks you need to watch out for the sector Index and bear in mind it's currently bank reporting season and that the bad sentiment for insurers will weigh heavily on banks with big insurance interests.

Be lucky.

 

[NastyItch]

SoldierofOne

Like you I am new to this game. In roaming around these, and other, boards I have found some useful sites. The two I have found not too intimidating and able to undestand some of the stuff on them, somewhat, with my limited knowledge are:

www.advfn.com
www.ft.com

There are many other sites members have suggested (these two are free) but I have not investigated further until, like you, I have soaked up a lot more info.

It is a good idea to find an experienced trader willing to look at your charts and help you understand the trends, S & R, patterns etc.

Hope this helps
NastyItch

 

[TBS]

Hi SOO

Before you dive in.....

1. What time frame are you looking to trade over?
2. If your entry point is at the market, what is your exit point?
3. How much money are you prepared to lose on the trade?
4. Can you leave any stops that you want to use whilst you are working?
5. Here is a link to the RBS chart:

RBS

Make it one of your favourites, then it is easy to get to, plus you can just change the epic code to get to another chart - or change the time frames to suit your trade.

6. Here is a medium term chart - until you decide on what sort of trade it is going to be (time frame) there is no point discussing key levels and how to construct a trade plan around them.

TBS

 

[FTSE Beater]

Hi SoldierForOne

I would agree with TBS's questions, and go one step further to say practise trading using the T2W competition. If you can't make money on that then it's best to stay away until you do.

I think it's the best place to practise trading.

HTH

 

[SoldierOfOne]

Kaffee and Nastyitch (like the handle!) – thanks for your welcoming comments (this is only my second post); looks like we are starting out at the same time on similar journeys. Look forward to sharing our experiences…

TBS and FTSEBeater – yep, good points and have taken on board. I will look into the T2W competition, but, firstly, as a first ever trade plan, I’d invite comments on the following:

Firstly, I should know my selling / exit point before I trade. Secondly, indicators – just support and resistance (at this stage, I’m currently just reading about the secondary, supporting cast).

Let us assume I have the full amount offered by CityIndex, £10,000. Of this, I am prepared to stake £2,000 per trade and this allows me 5 open positions at a time (if I chose). Max amount I’m prepared to lose is £300; I will assume £30 for dealing costs and stamp duty.

If entry point is market = 1400p (say)

I will place my stop loss at 1200p (thought about 1350p…); I’ll have to look into leaving a stop loss with City Index but would have thought so (as I’ll be working during the day)
Hence loss per share = 200p
And number of shares I can buy is 135 (27000/200)

This then would cost me 135 * 1400p = £1,890, just inside the max position per share

Exit price = 1500p

Risk/Reward = 0.5 (not very close to FTSE Beater’s 3; stop loss of 1350p would give ‘2’)

Perhaps not worth it at this moment in time.

Still, whole point is to learn, so I’ll assume I go for it

Time frame – 2 weeks (I’m basing this on looking at the chart : “trade what you see” ??: is this the way to ‘set a time frame’, or should it be one’s own requirements)?

If 1500p is hit, then automatically close the position and walk away with £135.

What advice would be given if the price is between 1400p and 1500p after 2 weeks? Or is this how long is a piece of string type of question?

(Kaffee – note your entry point and comment about not being a one trick pony; do I presume you have a watchlist of shares each with entry points in mind and you monitor these each evening. If one is reached, research again and if everything looks good, then you trade?)

I’d welcome comments on the above trade plan.

Thanks in advance

SoldierofOne

 

[FTSE Beater]

Hi SoldierOfOne

Firstly, I should know my selling / exit point before I trade.

Definitely, otherwise you can't work out how much your going to be risking on the trade

Secondly, indicators – just support and resistance (at this stage, I’m currently just reading about the secondary, supporting cast).

Pretty much, it comes down to whatever you feel most comfortable with

Let us assume I have the full amount offered by CityIndex, £10,000. Of this, I am prepared to stake £2,000 per trade and this allows me 5 open positions at a time (if I chose). Max amount I’m prepared to lose is £300; I will assume £30 for dealing costs and stamp duty.

That is a risk per trade of some 3% (300 ÷ 10,000 x 100) - It's a little high, I would aim for between 1-2%

If entry point is market = 1400p (say)

I will place my stop loss at 1200p (thought about 1350p…); I’ll have to look into leaving a stop loss with City Index but would have thought so (as I’ll be working during the day)
Hence loss per share = 200p
And number of shares I can buy is 135 (27000/200)

This then would cost me 135 * 1400p = £1,890, just inside the max position per share

Exit price = 1500p

Risk/Reward = 0.5 (not very close to FTSE Beater’s 3; stop loss of 1350p would give ‘2’)

Perhaps not worth it at this moment in time.

Correct

Time frame – 2 weeks (I’m basing this on looking at the chart : “trade what you see” ??: is this the way to ‘set a time frame’, or should it be one’s own requirements)?

See what happens in 2 weeks, but I would say if your trading EOD, then 2 weeks is a short holding period.

What advice would be given if the price is between 1400p and 1500p after 2 weeks? Or is this how long is a piece of string type of question?

You've then got to re assess the Risk and Reward to see if it's worth holding on to the share. It might be the risk / reward turns in your favour, or you might be sitting on a share that is going nowhere.

HTH

 

[Skimbleshanks]

SoldierOfOne:

I concur with what FTSEBeater says about drastically cutting your risk exposure.

If you are, say, starting with a pot of £10,000 then IMO you should not be risking more than 1% of your total pot on any one trade, and you should not be risking more than 3% at any one time.

That means you should divide £10,000 into £1,000 trades, and wait until the ideal trade comes along which gives you a maximum risk exposure of £100 (1% of the total £10,000 pot).

In an ideal world you would wait for that one to breakeven before placing your next trade on the identical lines. Alternatively, place three trades and wait for one to go into profit before placing your 4th trade. It's best not to have more than 3% of your total pot as risk, exposed to the market.

In this game the objective is to stay in to play again another day. Newbies always do the same - they throw a lot of money at the market and think that they can make more money that way. Wrong! At this stage, you should be patting yourself on the back if you manage your positions as I have explained, to keep your investment pot protected with little exposure.

Unfortunately, the vast majority of newbies don't realise that consistency of winning small amounts is the way to win and stay in this game. It also means that you can have loss after loss after loss (hopefully you won't, but let's look on the dark side) before you get wiped.

I look forward to seeing how you get on!

 

[SoldierOfOne]

Hullo Skimbleshanks

I guess I need to understand money management, is what you are saying. I can see why you think I would easily lose several thousand and no longer be in the game. Wise counsel. At the moment, I am more interested in understanding some of the basic concepts and applying them to a virtual trade – i.e. planning my trade with entry, exit and stops in mind.

I think what I have learned from going through this exercise is that RBS at the moment is not a good trade because the stop I have chosen is too big compared to the potential gain.

However, just to see if I understand you correctly…

If were to spread bet RBS but only risk 1% of my capital then I can bet 50p per point.

If my stop loss is met…1200p…downward movement of 200p * 50 = £100 (which is 1% of £10,000)

If my exit point is met…1500p…upward movement of 100p * 50 = £50.

Any other comments on developing an EOD strategy gladly welcomed.

Cheers

Andrew

 

[Skimbleshanks]

Yes Soldier (hope you don't mind me calling you by your first name) you've got what I was trying to explain.

If RBS does not meet your risk criteria, then there will be plenty of other stocks which do. If you keep your eye on a few and follow them every few days you will soon find one which falls within your risk parameters. The clever thing is to let the market come to you - you shouldn't chase the market. If you miss the entry, then so be it. Like buses, there'll be another one along soon.

Chasing is lethal, and you'll get squashed if it all goes wrong.

As you can see from your example with RBS, your risk:reward ratio is 2:1 (loss of £100: gain of £50). In an ideal world you should look for 1:3 and certainly no less than 1:2.

Although your maximum risk should be no more than £100, if you can find one which is, say, £50 or £75, then that is so much the better, obviously.

As you approach your target, you may wish to consider raising your stop to quite tight, so that if your stop gets hit then you still bank some profit, yet it still allows the price to carry on up if it is going to break out upwards. The old saying is cut your losses and let your profits run - much easier said than done, of course.

Always go for quality trades, not quantity ones. The horror-of-horrors is going into a trade because you're bored and think that a position in the market might spice your life up!

Skim

 

[ChartMan]

Always go for quality trades, not quantity ones. The horror-of-horrors is going into a trade because you're bored and think that a position in the market might spice your life up!

The wisest words I've heard for a long time....reminds me of someone I used to know....

 

[Skimbleshanks]

Me perhaps?

Been there, done that, got the singe marks!

 

[Kaffee]

Soldier of One,

Well this is my gameplan, fwiw....

Never really thought about EOD trading until I read FTSE Beaters' thread on Trading Basics.... I took his advice and went back and "practiced" on some old data... and I was surprised at how simple (I refrain from using the word "easy" purposely) it can be.

I was within a gnats' whisker of longing LLOYDS friday at £3.38 !!! Doh.... still, looks good for a run at £4.20. So yes EOD trading will be part of my armourey.

Currently I'm playing with currencies. EUR/USD. Again my rough analysis is short above 1.0799 and long below 1.0700. I'm doing ok. Room for improvement with stops though methinks.

As for a watchlist... UU, RBS, LLOY, DGE, NGT, SSE, SPW, SVT.
Currently long UU at 5.70.

At some point I intend to take one of Nazs' course on trading Nasdaq stocks.

Also, do I take it you are intending on stumping up the cash for share purchases, rather than trading on margin ??

Be lucky

 

[ChartMan]

No, Skim, Yours Truly

 

[SoldierOfOne]

Hi Kaffee
Thanks for your feedback. I’ll look into the shares you’ve suggested – I like to look at as many patterns to practice on.

Yes, in the first instance, the analysis I looked at was buying the shares but then, following Skimbleshanks note, I re-jigged the calcs, adjusting for money management, and looked at it from a spread bet point of view.

At the moment I am looking at some of the possible techniques to formulate a plan (stop, entry and exit) rather than whether to purchase or trade on the margin. It will be probably be the latter – just need to get around opening an account ;-)

I’m currently researching and reading as much as I can. I’ve initially concentrated on shares (as I’m more comfortable with these - lol) but am looking into the DOW too (public thanks, Chartman).

Kaffee - I would be interested in finding out more about EUR/USD; could you explain some more, please, either here or PM. As I understand it, in theory it is the chart/patterns/indicators that we study and the underlying commodity is irrelevant. What level of your trading are you at ? re Naz's course and optimal benefit from such 1-2-1 training.

As the saying goes…the universe is patiently waiting for our wits to grow sharper. Look forward to finding out some more.

Cheers

SoldierofOne

 

[Kaffee]

Well let's be clear about one thing, I'm a complete novice at spread betting. I was put off for ages by the "90% of day traders lose" stories that circulate.

I guess that could be true, and yes I am down a lot since I first dabbled in August, but I'm only staking small sums so I'm still in the game which is why I'm sure most daytraders lose, because they are forced to give it up.

The pick list above is predominantly defensive (Utilities) and that is my bias for the future. Mind, you, having just typed that, should add I shorted GKN at 1.68 today as a 10% rise for a FTSE 100 stock is unlikely to hold currently.

As for EUR/USD it's just range trading, but notice how the immediate resistance (circa 1.0810) was taken out big time today. It's come back form 1.090 several times this p.m. so I'm now short, with a target of 50 points. Stops in a 1.095 (yes I know it's risk to reward of 1:1)

As for Naz's course, I'm a bit like the Japanese, don't have many original ideas, but am fairly good at tailoring other peoples. I just need to be shown the right route to take.

Be lucky.

 

[SoldierOfOne]

Hi Chartman, Skimbleshanks and Kaffee et al
Thanks for the replies to my EOD query. I’m stuck at the following junction and wondered if anyone could help me – putting into practice what I’ve been reading up on:-

• Mainly trend patterns, reversal and continuations, ascending triangles etc (along with money management, stops, entries, exits) but what about for the ‘supporting cast’ – any pointers as the what you have found useful and why? (not looking for a ‘system’ but perhaps some places to look)

• (Kaffee) which chart do you use for the EUR-USD (looked on FT.com but no joy)

• Simulators – have come across TradIndex and City Index but there is only a limited choice of shares and indices to ‘virtual’ trade with. Or have I missed something? So, I’m thinking of either recording my virtual trades via spreadsheet (ignores sb bias) or opening a FINs account (more ‘real’), where I believe one can bet with 1p/point

Any comments on the above warmly welcomed.

TIA

SoldierofOne

 

[Dr Mike]

I would recommend Fins - you can bet 1p a point for the first 8 weeks (after that 50p) and get the real life experience of setting stops, missing fills, being distracted before you set the stop etc. etc.

Also Fins S&P 500 future is very cheap to play - the point is the whole number not the decimal although the spreads are big.

HTH

 

[Skimbleshanks]

Soldier:

No matter who you use (I too would opt for Fins because of the 1p starter), you will soon add another element to your trading - emotion.

This, quite frankly, is the killer. There's nothing on paper which can prepare you for the emotion of trading - even at 1p a point. I'd be staggered if the emotional side doesn't surprise you by its forcefulness.

Very few can trade without emotion (fear, greed, panic, rabbit in the headlights, etc), and it really is the key to whether you will make it as a trader. The best way that I know to keep emotion at bay is to pay particular attention to your risk exposure. A tiny risk exposure equates to less emotion when it goes t*ts up (which it will, often) because you know that tomorrow is another day and you can come back and play the game again.

If you keep your losses tiny, you will stay in the game. That, at this stage is all you should be asking for. Don't even think about profit.

Newbies want to trade because they want big profits. The older, experienced traders just want to stay in the game; profits are secondary.

 

[Kaffee]

Here you go... got this charting kit from Trade2Win...

http://www.currencypro.com/graph.php

Goalposts have moved on EUR/USD again, got stopped out of my last position.... Talk of 1.12 before the Iraq crisis is over.

GKN came good though. Have a look at BOC, near support currently... might bounce.

Be lucky.