ftse newbie

[JayZ1966]

Hi guys,

Sorry if this sounds as daft as i think it may sound but i'm going to put it out there and see if i'm totally wrong with this idea. I'm pretty new to day trading so im expecting criticism or to be shot down....

Ftse100 opens at 4050, Buy with a stop loss of 10 points at £10 per point and also short at £10 per point with the same stop loss. As i see it, which ever way it goes, recently at the start of the day it has been a dramatic rise or fall. If i had done this today i would have lost 10 points on the Buy but gained around 200 points on the Sell. 190 point profit? My idea was as soon as it starts to pick up again, cash in.

I haven't tried this yet as it seems rediculously easy and anything that looks too good to be true, usually is.

Joe

 

[tomorton]

You could backtest this - recommended as it sounds high-risk - but its one of those things that will always look good looking backwards. Using the open for your starting point allows objective backtesting, as does the exit point the close for the remaining position. But how would you objectively determine the closing point for the losing trade?

 

[Masquerade]

Your last statement probably answers your question.

 

[JayZ1966]

You could backtest this - recommended as it sounds high-risk - but its one of those things that will always look good looking backwards. Using the open for your starting point allows objective backtesting, as does the exit point the close for the remaining position. But how would you objectively determine the closing point for the losing trade?

I will backtest it further, do you know where i could get historic charts to do this please? I have some time off work coming up so will look much deeper into this.

As for the losing trade, i would only have a 10 point stop loss so that would be my loss on the incorrect trade while if there is a sharp drop / rise as im hoping for, the winning trade will more than make up for it..... i think we'll see.

 

[tomorton]

Sorry, don't know about historic intra-day charts going back more than a week. And you do need them because if you're always sticking with a 10pt trailing stop, there will be many times your 'winning' position will also be stopped out. Widening the stop isn't usually the answer to problems like this, it just exaggerates your wins and losses. Don't be tempted to use the intra-day highs and lows as reference ponts either in back-testing - its normal to be unable to call the day's extremes while we are at that value, it only shows as the top or bottom of the range when looking back.

The doubts above notwithstanding, there are strategies that simultaneously give buy and sell signals - though not at the same level - for example, ID/NR4. This asks you to identify a day which trades inside the previous range and also has the narrowest daily range of the last 4 sessions. It then demands a buy order be entered at the close above the high, and a sell order below the low. The reduced volatility of price action is supposed to foretell a dramatic price move one way or the other. It would be unusual for both orders to be triggered in the next session, so whichever breaks out, you hope to be winning.

 

[xxedrushxx]

Hey Jayz

I had this line of thinking too, especially when big news is about to be announced. Such as when the US were making the votes on the bank bailouts. I thought why not go long and short with tights stops and which ever way it shoots you will stop out with limited loss for one but keep making a sharp increase in the other. In regards to when to close the latter, i would imagine that would be based on how far you thought the market would go in that direction, of course if it started making a sudden swing in the opposite direction you could just close the ticket manually

The obvious risk here would be if the market went one way suddenly and then went the other way closing both your positions for a 20 pip loss. When the second bailout bill attempt passed the price rose sharply before falling. Would be worth paper testing though

 

[JayZ1966]

Hey Jayz

I had this line of thinking too, especially when big news is about to be announced. Such as when the US were making the votes on the bank bailouts. I thought why not go long and short with tights stops and which ever way it shoots you will stop out with limited loss for one but keep making a sharp increase in the other. In regards to when to close the latter, i would imagine that would be based on how far you thought the market would go in that direction, of course if it started making a sudden swing in the opposite direction you could just close the ticket manually

The obvious risk here would be if the market went one way suddenly and then went the other way closing both your positions for a 20 pip loss. When the second bailout bill attempt passed the price rose sharply before falling. Would be worth paper testing though

Im glad someone else was thinking the same thing. As for when to close, i would agree that as soon as the sharp rise/fall levels out i would close. Today would have worked fine with tight stops earning around 100 points if closing when it levelled out.

 

[Hoggums]

The markets today are too volatile for this strategy. Chances are both stoplosses would be triggered before either of the trades would be significantly in profit.

 

[Glenn]

Reading between the lines I assume you are thinking of doing this using spreadbetting, since you can't do it with Futures unless you use two different contracts, and I also assume you don't mean Options.
What you see happen to the Ftse underlying when it opens up by a large amount, has already happened to the SB prices, since they are based on the futures to some large extent.
e.g. Last nights Ftse close (underlying) was ~3900. At 8 am this morning it opened at 3860 and quickly went up to 4052 before reversing.
However the Ftse December Future at 8 am was 4065, and the SB prices would reflect that.
So you couldn't buy at the price you wanted and your hoped-for gain of ~150 points had already happened before 8 am.

Glenn

 

[7 Tree]

When trading the Ftse you have to careful of the gap or down that has occurred because of the US. Also the Ftse Ftures do not close to till 21:30 so they reflect the market and prices will be adjusted. If you are using SB then i would suggest you trade the Futures chart because its the market.

 

[JayZ1966]

Thanks for the replies, doesn't look like it's possible to get the trade in quickly enough to make use of the first rise or fall though. Back to regular trading strategy i guess. Im only paper trading at the moment, today has been quite boring. Went short at about 0705 with a 15point stop and won 45 points but done nothing since. I'm learning patience though i guess

thanks all.
Joe

 

[Shaun12uk]

Stops

How did you come to using 15 point stops. I am only paper trading at the momnet but know that the majority of my trades 50% woul have hit that stop with the markets volatility. May be splitting hairs but I would use prob 20-25 at the moment taking into account the spread and day trading with a target of 50+ points per trade.

Does any one have any views on there stops at the moment
Regards Shaun

 

[JayZ1966]

How did you come to using 15 point stops. I am only paper trading at the momnet but know that the majority of my trades 50% woul have hit that stop with the markets volatility. May be splitting hairs but I would use prob 20-25 at the moment taking into account the spread and day trading with a target of 50+ points per trade.

Does any one have any views on there stops at the moment
Regards Shaun

I used a 15point stop because i was looking to gain 40 points. I'm still new to this and working out risk/reward. Agreed though, i am now using 25 point stops and doing well by just trading in the first hours of opening. today i made 70 points after the drop to 4000 and used a 25 point stop. Daily target hit in 1 trade which i've acheived every day this week so far. Beginners luck? Maybe i'll be putting my own real money in but don't want to rush in yet. Small steps to stay out of the 90% club!

 

[Shaun12uk]

Hi Jayz,
Agreed it does seem to be debatable as to 15 to 25 stops depending on your risk factor and I do agree that the most profitable trades either seem to be in the morning between 8 to 9.45 and the afternoon about 2.30 (Times are GMT) when the US opens although I am not sure if the volatility in the afternoon is a bit to much for me.


Regards
Shaun

 

[JayZ1966]

Hi Jayz,
Agreed it does seem to be debatable as to 15 to 25 stops depending on your risk factor and I do agree that the most profitable trades either seem to be in the morning between 8 to 9.45 and the afternoon about 2.30 (Times are GMT) when the US opens although I am not sure if the volatility in the afternoon is a bit to much for me.


Regards
Shaun

I must be learning because i thought exactly the same thing. I've held off in the afternoon except on one occasion at around 1430 with the US open. Too volatile in the afternoon at the moment. 0700 - 0900 are the goldens hours
I'm done for the day today anyway but keeping and eye on the afternoons charts.

 

[7 Tree]

I use a 20 pts stop. its not how wide your stops are dependent on what style of trading you are performing. For intraday i use only a 20 pt stop on entry and make risk free after 15 and run a trailing stop. This is not the case when i trade Stocks I might use 50 pts stop. it all depends.