Investor or trader?

[quaid]

Hi all.

I am a newbie here. And I think I could qualify as an investor and not a trader. I have read up some stuff, and seem to think that I would like to hold positions for the mid-term. A couple of weeks maybe. So I tend to go long/short seeing the long-term trend. I have been trying out IG Markets (demo) and always use a stop, however, a 10 pip swing and the position is closed.

What am I doing wrong here?

1. Using the wrong platform? If yes, what should I be using?
2. Wrong strategy? Should the stops be further out? Should I buy options, rather than spot?

Apologies if this has been covered before and thanks for your responses.

Happy trading.

 

[tomorton]

10 pips on what market? 10 pips doesn't sound like much leeway for any market on a mid-term basis.

 

[quaid]

Hi again.

Thanks. EUR/USD and USD/JPY.

 

[tomorton]

Thanks quaid. I very rarely if ever trade forex but plenty of people trade successfully through IG so I suspect the platform isn't broke so don't throw it out for now. and maybe its not the instrument - if you can trade you can trade anything.

You might know the following to the n'th degree of detail in which case my apologies but I think its worth setting out some basics -
EUR to USD at last night's close was 1.435 but on e.g. Finspreads this is offered at pip of 0.0001. So their price for this pair is 14350. You should understand that if you trade this at only £1 per point, that represents an investment of £14,350. You could lose this on a long if you didn't set a stop and the price dropped to zero: that's bad but, of course, as the price can rise without limit, there is no limit to your potential loss on a short.

(I have tried this with people at work who are not in the markets in any way - £1 a point they say, that sounds fine, let's do it. Then they realise that a pound a point on the FTSE is still five thousand quid and they go pale and start walking away).

Your TA could potentially tell you everything in the known past about what to do next. It will certainly give you direction and an entry point. You should use it to identify a profit target if your thoughts on the next price move are right - and wouldn't that be nice we all agree. But before you enter the trade also TA a stop. This should be the closest point to your entry that price will need to move in the 'wrong' direction to prove you were probably wrong about direction. Make sure that the stop is not so far away that you risk an excessively damaging hit in £ if price goes straight there without a pause. Try to find a market to trade where the target is further away than the stop, but still indicated as attainable by your TA: no point risking £14,350 at the stop just to make a tenner from the target. Make sure the stop is not so close that normal; volatility of the market and the spread do not take you out of a good position. Once you have set a stop in a suitable place, always obey it.

PS - Forex is very news-sensitive, and TA won't tell you what economic announcements are coming up and sometimes gives no clue as to how the market will react to an announcement in the calendar.

 

[everyonerich]

i will teach you for free if youre able to temporary re-locate

 

[tomorton]

Mean me or quaid everyonerich? If me, I can't come down there, its way too hot.

 

[mb325]

10 pips is not enough if you're trading forex and looking to hold a position for weeks.

 

[everyonerich]

Mean me or quaid everyonerich? If me, I can't come down there, its way too hot.

haha.. just kidding, i'll teach for free using email.

[email protected]

 

[£10kLoser]

Quite clearly 10 pips is nowhere near enough - more like 200 would be reasonable.

 

[HawkTrader]

10 pips is not enough if you're trading forex and looking to hold a position for weeks.

Quite clearly 10 pips is nowhere near enough - more like 200 would be reasonable.

Exactly, 10 pips is almost sure to stop you out!

I'd say 20-40 pips for day trade, 50-100 pips for swing trade and 200+ for anything longer. Of course it's different with every pair...

 

[Jason101]

Exactly, 10 pips is almost sure to stop you out!

I'd say 20-40 pips for day trade, 50-100 pips for swing trade and 200+ for anything longer. Of course it's different with every pair...

And that would be after a lot of screen time.

 

[quaid]

Hi again.

Thanks a lot for the replies everyone. I get what you are saying tomorton, and everyonerich is not getting what he is not saying

I guess it boils down to the risk and the stop levels.

Thanks again.

 

[everyonerich]

quaid, there are systems that is using 10 pips stoploss.. you listen to others which only suitable for them, not you.

 

[mb325]

quaid, there are systems that is using 10 pips stoploss.. you listen to others which only suitable for them, not you.

Yeh, and these systems are called scalping, on a low timeframe. Trading weeklies suggests a target of at least several hundred pips, I don't know any traders with an R:R of 1:20+

If you want to hold a position for weeks you need to stay away from the intraday swings which WILL stop you out 99% of the time when you're trying to pick top/bottoms, which is what your strategy is currently attempting.

 

[Pippy5000]

You're causing yourself harm by using 10 pip stop losses unless you are shooting for a 10-15 pip target and you're using stop orders (i.e. trading in the direction of price). If you're using 10 pip stops and using limits (i.e. trying to enter at the point you think the price will reverse) then 10 pips will most certainly harm more than it helps..

I generally use 25 pip stops with Euro limit orders and 20 with stop orders.. that's entering 5 pips above/below s/r with a stop loss 13 pips above/below the breakout level (2 pip spread included).. Spot will generally (but not always) come back to the original breakout level, or even dip a little beyond as scalpers take profit. If you're going to stick with the trade then you'll need to give it a little breathing room.

However, if you're new you probably should stick to an investment strategy.. Invest in a currency and get rid of it when your investment values or devalues to a predetermined level. You don't know how to be a trader just yet so you'll almost surely be eaten alive if you attempt trader's trades. If you think Euros will increase in value, just buy some when they reach a certain price and then wait.

 

[quaid]

Hello all.

Thanks a lot for the responses, hope everybody had a great Christmas. I think we agree about the 10pips stop is too tight.

I guess I will have to work on an investment strategy, as this thing is turning out to be a little more daunting than I initially thought

Another one, I just applied for an account at IG - I got it in GBP, although I think I will mostly work with USD or EUR. Would it be better to get it in USD/EUR?

Thanks again and a Happy New Year.

 

[Pippy5000]

there's no difference mathematically, it's just inverted, but the vast majority of traders will refer to it as EUR/USD and refer to the charts that way.. go with EUR/USD..

 

[shadowninja]

I swing Euro for anything between 1 day and 3 weeks. 100-200 pip stops depending on how things move. That said, you could start with a 1 pip stop if you're a trading god and can pick the precise point the market will change direction.

As an aside, calling it "investing" only makes you sound clever to yourself but it's still trading... or even "gambling"... if you don't know what you're doing (amateur gambling as opposed to professional gambling). Don't take this message the wrong way. Understand why you need to call it "investing". I mean, you might call it "investing" but the market isn't going to think "Ooh! An investor! He's clever. I'd better give him his money!" You can hold for 2 years. It's called position trading.

 

[quaid]

Hi again.

Thanks for the reply. I think I understand the inversion bit - the question was aimed more at which currency should I maintain my account in. If I have an account in GBP and I work mostly with EUR/USD, IGMarkets would have to convert my orders every time. And I may be exposed to conversion spreads also.

OK - so position trader I am

 

[anestelen]

An investor buys a stock in a company because he thinks that the company is a good investment, which it may or may not be. Anyway he plans on tying his money into the future of the company.

A trader is generally looking to profit from what he perceives to be an anomaly in the price of the security. He perceives it to be either too cheap or too expensive in relation to what it should currently be trading at and either buys or sells the security in hopes that he is correct and that the price of the security will return soon to its more normal price range at which point he will sell it and make a profit.