Like many others, I have been badly affected by the recent market downturn and have lost a considerable amount both on paper and in real terms from this bear market.
Some of you may know that I have turned my attention away from the UK market and now trade US stocks. I thought it might be helpful to outline my reasons.
1. In the UK market recently, the volatility both long and short has meant that trading has been extremely difficult even using TA indicators and overnight news from the US has often ruined any profitable positions. My reaction to this has been to stay out of the market on an overnight basis.
2. This leaves intraday trading as the alternative. The greatest benefit from intraday trading is that it eradicates the effect of the general market from your trading. You can make money both long and short with no overnight positions to worry about. I do not trade the UK intraday for two reasons - I simply do not trust level 2 information - and the movement on stock prices are often terribly slow. The US stocks are dealt in higher volumes and are much more dynamic.
3. Before starting to trade live, it is very important to study the market. This is even more important in the US as the rapid changes in prices will create dangerous situations within seconds if you are not alert. I spent three months paper trading and building up a knowledge of various stocks and their characteristics.
4. Some traders use chart patterns, support and resistance levels (both of the stock and the indices) and general feel for the markets. My approach is almost wholly TA based. If you follow the TA approach it is important to experiment with many indicators before chosing those that suit your methods and strategies.
5. Consider whether US intraday trading will suit your personality. It needs both the patience to sit for perhaps many hours until you see the proper entry point that suits your parameters and it also requires the speed of thought and execution to enter and exit your trades at the right time. So your wait could be hours and your trade could be over in seconds.
6. Of course, in a normal day you might make many trades in a day. This in itself raises the matter of commission payments. At $15 per trade and with 10/20 double trades per day common, you can see that anything up to $600 commission per day are commonplace. This of course can be accepted so long as you are making a net profit. But it again highlights the need to know the market before committing funds.
7. This high number of trades is known as scalping and is symptomatic of my TA strategy where I exit trades quickly while still in profit without risking a retracement which might eradicate my profit. Others take a longer term intraday view hopefully leading to fewer trades and lesser commission bills.
8. In my opinion, this type of trading requires quick reactions both from the trader and the broker with market spreads available. Most US traders use brokers providing the trader with direct access to the market and almost instant execution times.
I am sure I have left out something along the way, but hopefully some of the other US traders can fill the gaps.
Some of you may know that I have turned my attention away from the UK market and now trade US stocks. I thought it might be helpful to outline my reasons.
1. In the UK market recently, the volatility both long and short has meant that trading has been extremely difficult even using TA indicators and overnight news from the US has often ruined any profitable positions. My reaction to this has been to stay out of the market on an overnight basis.
2. This leaves intraday trading as the alternative. The greatest benefit from intraday trading is that it eradicates the effect of the general market from your trading. You can make money both long and short with no overnight positions to worry about. I do not trade the UK intraday for two reasons - I simply do not trust level 2 information - and the movement on stock prices are often terribly slow. The US stocks are dealt in higher volumes and are much more dynamic.
3. Before starting to trade live, it is very important to study the market. This is even more important in the US as the rapid changes in prices will create dangerous situations within seconds if you are not alert. I spent three months paper trading and building up a knowledge of various stocks and their characteristics.
4. Some traders use chart patterns, support and resistance levels (both of the stock and the indices) and general feel for the markets. My approach is almost wholly TA based. If you follow the TA approach it is important to experiment with many indicators before chosing those that suit your methods and strategies.
5. Consider whether US intraday trading will suit your personality. It needs both the patience to sit for perhaps many hours until you see the proper entry point that suits your parameters and it also requires the speed of thought and execution to enter and exit your trades at the right time. So your wait could be hours and your trade could be over in seconds.
6. Of course, in a normal day you might make many trades in a day. This in itself raises the matter of commission payments. At $15 per trade and with 10/20 double trades per day common, you can see that anything up to $600 commission per day are commonplace. This of course can be accepted so long as you are making a net profit. But it again highlights the need to know the market before committing funds.
7. This high number of trades is known as scalping and is symptomatic of my TA strategy where I exit trades quickly while still in profit without risking a retracement which might eradicate my profit. Others take a longer term intraday view hopefully leading to fewer trades and lesser commission bills.
8. In my opinion, this type of trading requires quick reactions both from the trader and the broker with market spreads available. Most US traders use brokers providing the trader with direct access to the market and almost instant execution times.
I am sure I have left out something along the way, but hopefully some of the other US traders can fill the gaps.
