Your "Best" Trading Rule for Beginners

[johenmo]

If the experienced could name one rule that they have/stick to that they believe has saved their bacon what would it be.

All comments offered are purely opinion or experience and do not constitute advice, recommendations or such, and are purely for interest sake.

I start this as I have been backtesting and the thing I found (which I didn't apply!!!!! - despite reading it on this forum) is to cut your losses!.

Just fiddling with one system and altering the timing of the exit from 5 days to 20 days took it from 39% profit to 11% loss = 50% difference in outcome.

This was with 21 different stocks (from ASX50) over last 10 years. nOt necessarily a great return - it's the principle that's important.

I had to share this epiphany with someone!!

Hope others can provide something - I see a lot of new posts which show the bewilderment that I am steadily reducing.

Cheers

[MS+Tradesim]

You don't have to be in the market. Stay out if your edge is not clearly visible.

If you don't know how you are going to get out then you have no business getting in.

[MRC & Co]

DON'T REVENGE TRADE.

[arco]

.

NEVER add to a losing trade

[johnnyg]

Im only fairly new to this (1 year) and the biggest thing I have learnt (and more then once aswell) is the importance of a stop loss. If used I would of exited alot of positions with 50-70% profit. Instead I was greedy and ended up with a negative %. That said im still in the game and learning all the time, so always using a Stop Loss would be mine.

[nick2fish]

Don't get emotionally attached to any stock............ Period Sell it and the chances of buying it back at an even lower price are 50/50 and if not there are lots of other "buys" to make gains from :) My:2twocents

PS : Probably I am posting this comments as a reminder for myself as much for anyone else :D (Go Mac Bank :banghead:)

[nunthewiser]

financial management ,.......... no lookey after = no tradey

[jersey10]

2 come to mind for me:

"treat it like a business" (I think it was Tech/A who i first noticed gave this piece of advice somewhere on this forum)

"the next thousand trades" (this one was from Nick Radge)


i suppose they're quotes rather than rules but you get my drift

[alwaysLearning]

I agree with the thread creator.

Knowing when to exit for me is the most important thing in trading, in such a way that if you get it wrong, you can terminate the trade and/OR, if the situation is right, you can subsequently trade in the other direction.

[arco]

.
Only ever use 2% of your capital for any trade. That way you
can still make 50 bad trades in a row before you finally blow the account. :(

[jersey10]

.
Only ever use 2% of your capital for any trade. That way you
can still make 50 bad trades in a row before you finally blow the account. :(

not sure that is mathematically correct?

[Awesomandy]

Have your exit strategy ready BEFORE you even consider pressing the "buy" button - and stick to it. Rather then trying to chase a trade that went wrong, it's often better to close out of it instead and improve your strategy if necessary, so you can be in a better position for the next trade.

[James Austin]

my best trading rule:

STOP LOSS
STOP LOSS
STOP LOSS
STOP LOSS
STOP LOSS
STOP LOSS

and for those who missed that

STOP LOSS

[arco]

not sure that is mathematically correct?

Probably not, but it seemed funny at the time :)

[arco]

Always place your stop loss at the same time as you place your trade,
and on no account move it just to give the trade a little more leeway.

[James Austin]

Always place your stop loss at the same time as you place your trade,
and on no account move it just to give the trade a little more leeway.

yes,
you dont need a bigger stop,
you need a better entry

[CAB SAV]

Must have- use a Set of rules. One rule isn't enough

[nunthewiser]

and it all boils down to ............ post no.7

[shaunQ]

Well, In my short experience, with small capital ~5K, I have found being tooo tight on your STOP LOSS is bad. Depending on the circumstances.

Consider you buy $2K of stocks, which will cost $40 to buy and sell, which is 2% of your investment. In this market stocks are swining 10-20% both ways in a short-timespan.

I recently bought ANZ at 16.50 odd, which went down to 15ish. I sold at 15.80or so for a loss. A few days later it was 18. And I have other examples. :(

Fair enough, you need an amount which you pull out at, but it should take into the chance of the company going under completely, and the cost of the trade vs your capital, and previous supports.

What I have found to be the most important thing, with small capital, sorry guys, is ENTRY timing. Never buy if you are near a previous resistance level (or very far from the previous support).

[BBand]

Hi Jo,
This is from a discretionary view:
Most trades at some time will be in profit - do not let a profit become a loss.

Good entries (tight stops) are just as important as good exits

Be selective with your trades, take only the best

and the most important ----------
Use multi timeframe analysis to determine the underlying structure of your proposed trade, and only take it if the time frames are in alignment

[tech/a]

In addition to those above.

(1) Always trade on the right side of the market.
(2) A trading plan isnt worth the paper its written on if you have no idea if it can be profitable.
(3) Understand Positive Expectancy and how to achieve it.
(4) Understand Fixed Fractional Position Sizing.
(5) Learn how to use the power of Leverage and Compounding.
(6) Everything is YOUR fault.
(7) Dont trade if your undercapitalised.
(8) Successful trading is BORING.
(9) Keep it simple.
(10) Its NOT about being right!
(11) Find a mentor.
(12) It doesnt matter if your wrong only how long you stay wrong!
(13) Let the trade come to you.

[mazzatelli1000]

(12) It doesnt matter if your wrong only how long you stay wrong!


I like this...

Once the assumptions you initially made to enter a trade are proven incorrect by the market, get out.

[skyQuake]

Always do the opposite to what the financial media says.

[tech/a]

I like this...

Once the assumptions you initially made to enter a trade are proven incorrect by the market, get out.

Stole that one from Radge!
as is (10)

[korrupt_1]

Follow the trend.
More winners from following a trend than going against it.

[sammy84]

In addition to those above.
(11) Find a mentor.

Hey tech/a

I have always wondered about how you go about finding a mentor? Do you mean a mentor that you actually make communication with, or a public figure mentor and which you follow by reading? I can imagine the benefits of having someone to converse with who has seen it all before and has been successful would be immense.

[MRC & Co]

Follow the trend.
More winners from following a trend than going against it.

Yeh, good one.

Trend your friend.

[canaussieuck]

Ok, i like this one, see if you can tell me who said this:

"If you fall out of a four story building, you are not going to be getting up anytime soon.":D

Use it as a idea to how quickly an instrument will recover afte a big move.

Cheers,


CanOz

PS. it may not be exactly quoted.:o

[Sakk]

Trading is a losers' game. He who loses best will win in the end!

Rule 1
In a losing game such as trading, we shall start against the majority and assume we are wrong until proven correct! (We do not assume we are correct until proven wrong.) Positions established must be reduced and removed until or unless the market proves the position correct! (We allow the market to verify correct positions.)

Rule 2
Press your winners correctly without exception.


from Phantom of the Pits.......highly recommend it, it's free on the web just google it. Read it several times before I really grasped his rules - turned my trading around the moment I implemented into my trading rules

[johenmo]

Tks for all the insights so far. I started this as I found when I first looked into it that this sort of info was in ASF but woven into the posts of hundreds of threads. As a newb, I started to collect this stuff to give me some idea of how to sort my myself (mentally & physically) - I also work better from bullet points as reminders.

I can say that if I had been able to see something like this collected wisdom in one place then I would likely have held off buying stocks at this stage. Or would have exited 2 of my positions before they became "hopeless"!! At least one is green, which gives me hope that I can learn something - my review shows me I did a better selection re sector and indvidual stock.

So again, tks.
Cheers
John

[kennas]

(6) Everything is YOUR fault.
Next time something goes wrong Tech I will remind myself of this.

It was YOUR fault.

:p: :)

[mazzatelli1000]

Trading is a losers' game. He who loses best will win in the end!

Rule 1
In a losing game such as trading, we shall start against the majority and assume we are wrong until proven correct! (We do not assume we are correct until proven wrong.)



Im personally not comfortable with this one, but I think it is more psychological, as some people will understand this risk management from another perspective

"Assume we are wrong until proven correct" - For me this means I can buy today and eventually some time in the future it will go up and be proven correct

No ones right or wrong - just clarifying interpretation

[tech/a]

Tks for all the insights so far. I started this as I found when I first looked into it that this sort of info was in ASF but woven into the posts of hundreds of threads. As a newb, I started to collect this stuff to give me some idea of how to sort my myself (mentally & physically) - I also work better from bullet points as reminders.

I can say that if I had been able to see something like this collected wisdom in one place then I would likely have held off buying stocks at this stage. Or would have exited 2 of my positions before they became "hopeless"!! At least one is green, which gives me hope that I can learn something - my review shows me I did a better selection re sector and indvidual stock.

So again, tks.
Cheers
John

This is very true and is part of the answer to the last quote below.


Next time something goes wrong Tech I will remind myself of this.

It was YOUR fault.

:p: :)

Thanks mate Ive got big shoulders.


Hey tech/a

I have always wondered about how you go about finding a mentor? Do you mean a mentor that you actually make communication with, or a public figure mentor and which you follow by reading? I can imagine the benefits of having someone to converse with who has seen it all before and has been successful would be immense.


Yes been asked and raised before. I make no secret that Radge is mine and I pay for it. I like the way the guy thinks. I can see exactly how he trades and his thinking on a whole range of stocks/indexes and commodities. He also hands out many free gems on this and his site.
Personally I look for mentors in anything important enough to need one.
Business I have several.
Property several.
Trading Radge and all you guys.

All I did was approach those who I knew/knew what I needed to know and took them to lunch---I was/am up front. I remember a leading Property Developer I rang him and said I'd like to take you to lunch and hear your story for an hr or so. He agreed and told me more than I could have asked for if Id sat and questioned him.

I have a seperate folder that I paste gems into and periodically add or delete from. I'm not suprised that experience has seen me delete many an adage I believed was wise only to find by experience that it was/is a phurfy.

The best way to find answers are to be specific in question. Ive learnt heaps from forums,even from people I dont agree with at times.----or ever!

[nunthewiser]

:D no worries tech/a glad to help teach you stuff....... that,ll be $ 59.95 thanks

[mazzatelli1000]

Stole that one from Radge!
as is (10)

Ha!! Never mind Radge
Because its pure gold!!!!

[IFocus]

Best advice I can give (not a rule) is test your method extensively and understand the method as an expert.

At the same time understand money management as an expert.

Then let the market come to you.

If a beginner is determined to press on before doing the above (as I did DOH) then always use and take your stoploss its the only thing you can control and it will keep you in the game.................longer

[awg]

Always do the opposite to what the financial media says.


Know what you mean, but I cant entirely agree.

The Fin Review is helpful for new learners re fundamentals, and its expose on ABC Learning, for example, was well ahead of the curve.


My best rules...Move Stop Loss to Break Even (including brokerage costs), asap

Never go against a relentless unbroken trend

[MRC & Co]

Never go against a relentless unbroken trend

Yeh, it's also good to note trend structure and strength, if the current pivot low does not intersect the most recent pivot high, the trend is strong. Times like this, quick pyramiding and scaling out can make some serious $$$$$$. This is where the timing of your entry becomes CRTICAL.

[skyQuake]

Know what you mean, but I cant entirely agree.

The Fin Review is helpful for new learners re fundamentals, and its expose on ABC Learning, for example, was well ahead of the curve.

Ahh yes, should clarify; Don't listen to the muppets on financial news channels. AFR is not bad; Thing to note is when it does coverage of a speccie, the market suddenly becomes aware of said speccie and behold! Volatility! For good or bad... Villiage Life, AUM and CAZ (Cazaly resources) come to mind.


Never go against a relentless unbroken trend
Hhahahahaa, trade a bit on the Hang Seng and you will have this so firmly ingrained into your psyche... you can have a 200tic move with 0 counterticks to get out.:eek:

[Grinder]

Its a head game! Once the mind is mastered the rest is just going through the motions.

[jeflin]

In trading, it is common to go from $5000 loss in the morning to $400-$500 profit in the afternoon and I exit. I think the main thing about trading is not only the stop loss but to use money you can afford to lose. Stop loss is not a hard and fast rule as stocks can rebound sharply right after you exit.

Also the discipline to guard against greed is important. Even if the stocks rise later, forget about it.

[BBand]

Here's a couple more that may be worth considering, maybe not so well publishised (is there such a word?)

Have an open mind

Whatever trading plan / method / setup that you currently use - IT CAN BE IMPROVED

Before you incorporate a new "gem" into your trading - check it out thoroughly to make sure it works for you

Experiment

Spend lots of time looking at charts, charts and more charts

and finally:
Gurus are not infallable.
Because they appear to make trading appear easy, i.e. their returns etc. - does not mean that you will accomplish the same results.
The method they use almost certainly works - but you have to apply it in your own best interest.

Hope this is of help
Peter

[tech/a]

In trading, it is common to go from $5000 loss in the morning to $400-$500 profit in the afternoon and I exit. I think the main thing about trading is not only the stop loss but to use money you can afford to lose. Stop loss is not a hard and fast rule as stocks can rebound sharply right after you exit.

Also the discipline to guard against greed is important. Even if the stocks rise later, forget about it.


Love this seen it before posted by others.
I have one question to ask you.

You lose the money you can afford to lose----then what?
I suppose re finance with more money you can afford to lose.
Then
You lose more money you can afford to lose---then what?

If a stop loss is not a hard and fast rule why have one? Just go on gut feel.
Stocks can also plummet endlessly after you exit as well.

Your example is also common to myself but more often in the 100s than 1000s and I use hard stops these stopped losses only total a very small % of my capital base often 1-2%.My method is vastly different than yours you'll note.

[Pairs Trader]

1) prices will go further than you think
2) good trades are hard to find
3) trade at your price; dont chase
4) If you don't know what your edge is; you don't have one
5) disclipline is the key
6) commission & spread fees are a bigger hurdle than you think
7) having good hardware, software & platforms is a must

[Sakk]

Im personally not comfortable with this one, but I think it is more psychological, as some people will understand this risk management from another perspective

"Assume we are wrong until proven correct" - For me this means I can buy today and eventually some time in the future it will go up and be proven correct

No ones right or wrong - just clarifying interpretation

some more info to clarify rule 1 from POP....

The correct way to control positions is to only hold them once they prove to be correct.

Let the market tell you your position is proven correct, but never let the market tell you that your position is wrong. You, as a good trader, must always be in command of knowing and telling yourself when your position is bad.

The market will tell you when your position is a good one to hold. Most traders do the opposite of what is correct by removing positions only when proven wrong. Think about that. Your exposure and risk is much higher if you let the market prove you wrong instead of your actions removing positions systematically unless or until the market proves your position correct.

You never want to be in a position that is never proven correct. If you only get out when the market proves you wrong, it is possible to have higher risk due to the longer time period required to prove your position wrong.

What makes this strategy more comfortable is that you must take action without exception if the market does not prove the position correct. Most traders do it the opposite by doing nothing unless they get stopped out, and then it isn't their decision to get out at all -- it is the market's decision to get you out.

Your thinking should be: When your position is right, you have to do nothing instead of doing nothing when you are wrong!

It is very critical to your success in trading. Over time it has proven to be the rule which keeps the losses small and keeps a trader swift and fast to take that loss. It won't always prove to be correct, but you will stay in the game this way.

[cuttlefish]

some more info to clarify rule 1 from POP....

The correct way to control positions is to only hold them once they prove to be correct.

Let the market tell you your position is proven correct, but never let the market tell you that your position is wrong. You, as a good trader, must always be in command of knowing and telling yourself when your position is bad.

The market will tell you when your position is a good one to hold. Most traders do the opposite of what is correct by removing positions only when proven wrong. Think about that. Your exposure and risk is much higher if you let the market prove you wrong instead of your actions removing positions systematically unless or until the market proves your position correct.

You never want to be in a position that is never proven correct. If you only get out when the market proves you wrong, it is possible to have higher risk due to the longer time period required to prove your position wrong.

What makes this strategy more comfortable is that you must take action without exception if the market does not prove the position correct. Most traders do it the opposite by doing nothing unless they get stopped out, and then it isn't their decision to get out at all -- it is the market's decision to get you out.

Your thinking should be: When your position is right, you have to do nothing instead of doing nothing when you are wrong!

It is very critical to your success in trading. Over time it has proven to be the rule which keeps the losses small and keeps a trader swift and fast to take that loss. It won't always prove to be correct, but you will stay in the game this way.

good explanation - cheers.

[BBand]

Hi Sakk,
I'm with you

I know within one period, if or not my trade is likely to be successful - no follow through and I'm out.
You don't have to wait for your stop to be hit!

The most dangerous part of a trade are the initial few bars, retracements can be a bit of a worry - but if they happen on low volume - then everything tends to be hunky dory

Peter

[jeflin]

Love this seen it before posted by others.
I have one question to ask you.

You lose the money you can afford to lose----then what?
I suppose re finance with more money you can afford to lose.
Then
You lose more money you can afford to lose---then what?

If a stop loss is not a hard and fast rule why have one? Just go on gut feel.
Stocks can also plummet endlessly after you exit as well.

Your example is also common to myself but more often in the 100s than 1000s and I use hard stops these stopped losses only total a very small % of my capital base often 1-2%.My method is vastly different than yours you'll note.

I appreciate the wisdom of a mechanical approach to implementing stop losses. It is defensive and can prevent huge losses but a trader must have the flexibility to adjust his strategy.

I like to set stop loss at 10% but from personal experience, I sometimes made conscious decisions to let losses run a bit deeper before exiting. It has saved my skin on a few occasions. Why is that strategy used for one stock over another is difficult to explain.

Much like why a market recover spontaneously for no particular reason after a morning of hard selling. By the way, I have not done much trading for years as my risk appetite has changed.

[MRC & Co]

Oh, here is one I heard the other day, LOVE it and SO SO SO perfect for intraday traders on all markets and notably, the SPI.

Don't go for the juice, if you can't handle the squeeze!

ha ha ha, still cracks me up!

[tech/a]

I appreciate the wisdom of a mechanical approach to implementing stop losses. It is defensive and can prevent huge losses but a trader must have the flexibility to adjust his strategy.

I like to set stop loss at 10% but from personal experience, I sometimes made conscious decisions to let losses run a bit deeper before exiting. It has saved my skin on a few occasions. Why is that strategy used for one stock over another is difficult to explain.

Much like why a market recover spontaneously for no particular reason after a morning of hard selling. By the way, I have not done much trading for years as my risk appetite has changed.


There are many ways to approach this.

Having a hard % stop may not be the wisest approach to risk.
In these markets its not unusual for me to have a 3-4c risk on a $27 stock.
BHP I was trading on Friday and had a 4c stop on a 5 min chart.
Never got hit,still in it. If it did Id have lost $40 plus Commish on a $27,000 trade.
Ive often reset on another trade is this occurs 15-20 mins later and pulled a k.
I could take 20 $40 hits and have one $1K + trade and I'm still profitable.
Mind you Id be a pretty crap trader if I got 20 in a row!

[weird]

Mind you Id be a pretty crap trader if I got 20 in a row!

Not sure if I agree with the last statement Tech ... feel like crap yes, but getting that sort of streak with only a 40% win is more than probable. A good 'trader' is more than likely to get 20 in a row wrong at some point, but a good trader , as you mentioned, would not have wiped his account out, and would be in a position to continue trading.

[cuttlefish]

There are many ways to approach this.

Having a hard % stop may not be the wisest approach to risk.
In these markets its not unusual for me to have a 3-4c risk on a $27 stock.
BHP I was trading on Friday and had a 4c stop on a 5 min chart.
Never got hit,still in it. If it did Id have lost $40 plus Commish on a $27,000 trade.
Ive often reset on another trade is this occurs 15-20 mins later and pulled a k.
I could take 20 $40 hits and have one $1K + trade and I'm still profitable.
Mind you Id be a pretty crap trader if I got 20 in a row!

Tech I'm assuming you are talking direct shares here and not cfd's or any other such stuff.

Thats a very tight stop - do you find it difficult to manage? Its not uncommon to get a 5c intraday spread open up with even small volatility spikes on leading stocks - I saw a 20c spread for a while on one stock on Friday. Are you using autostops or manual stops? (I'd be thinking manual would be easier to manage).

Also catching a full $1 move on a stock like BHP without a 4c down move isn't that common an occurence I wouldn't have thought - so what is a more typical win trade in such a scenario? Or is your trailing stop wider than the initial stop? (and even still, catching a full $1 move I'm assuming is fairly rare?)

[Reealjrd]

Forex trading is a mind game. Once it is set you go on to your path. You can only set your self here when you trade with your own strategy. Brokers are a means of help for you to know all the tools and procedures to open a trading account etc.

leverage, margin etc are all the sources which you use when you are stuck with the marketplace. Make your own strategy and start trading. Don't worry about the commissions or fees the broker is taking. Once you are set in this market you happly pay the commissions.

I am also trading with same procedures as i have discussed above.

[BBand]

Hi Cuttlefish
Smart traders use a lower timeframe to fine tune their entry/exits.

In theory, the lower the timeframe, the closer the entry / stop level i.e. risk (provided your stock has enough liquidity to make the chart meaningful)

A move on a lower timeframe manifests itself onto the higher timeframe. i.e. The higher timeframe "is the sum total of all the lower timeframes" can't remember where I heard /read this truism.

Personally I can't handle timeframes as low as 5mins, I've tried them but have decided they are not for me, they are the domain of the professionals and pro active traders.

Hope this helps
Peter

I'm sure Tech will explain it a bit better

[MRC & Co]

When you have such tight stops, your entry becomes paramount. Usually safest buying counter ticks in a trend IMO.

This is where it helps to have enough contracts (shares) to scale out. Take some quick, let some more run and widen the stop. Let a final lot run with a much wider stop.

[tech/a]

Tech I'm assuming you are talking direct shares here and not cfd's or any other such stuff.

Thats a very tight stop - do you find it difficult to manage? Its not uncommon to get a 5c intraday spread open up with even small volatility spikes on leading stocks - I saw a 20c spread for a while on one stock on Friday. Are you using autostops or manual stops? (I'd be thinking manual would be easier to manage).

Also catching a full $1 move on a stock like BHP without a 4c down move isn't that common an occurence I wouldn't have thought - so what is a more typical win trade in such a scenario? Or is your trailing stop wider than the initial stop? (and even still, catching a full $1 move I'm assuming is fairly rare?)

BB has the basics.
I'm currently very short term trading often days without a trade as I can currently only trade long as I'm only trading stock. MR C also has part of the method.

This is the plan which has taken quite a while to perfect but is reaping the reward now.Without going into the entry exit stratagies which are Elliott VSA based.

Take Friday.
You may have noticed the Asian markets reverse from bearish to bullish at around Midday. Well I did. So I took several smaller positions with the intention of keeping O/N. The market was mildly bullish so I set tight stops as if I was stopped out then the market wasnt doing as expected.
I was on one and re entered again 15 mins later to hold O/N (A $40 loss).
I currently have a fair profit.

Anyway on Monday I expect bullishness which I will hit hard probably taking 1 or 2 more trades in each depending on what setup presents itself. Each larger than my initial trades.

If I have doubts about continued Bullishness (I'm suspecting a return in his wave 4 after a correction against its initial move,it should finalise at 4350-4800 ish---All trades taken are in wave 4 corrective phases---if the analysis is correct)--I'll sell at least 50% of trading on Monday.

If I have grave doubts then I'll sell the lot.
In anycase if I hold overnight my exposure will be decreased dramatically to that held durig the day.
In this environment I can only be sure of whats happening now.
The whole trading method is designed to keep as much R/R on my side of the fence and absolutely minimise risk.

With IB I can trade 4:1 Margin during the day which can give me very sizable positions with minimal risk everyday I trade.
Even if I look like being out of the office for more than an hr I'll close everything out rather than set a trailing stop which if I'm going out will be very tight---I'd rather be stopped out with a premature profit than cop a sizable loss in this market.

Its my own hybrid of T/H's scalping---But its not scalping just very short term trading. I dont want to be caught on the wrong side of those gaps,If you trade BHP you'll know what I mean.(Those O/Night ones!)

Consistent profit on a consistent basis is my aim--and plenty of stress free sleep.(up now as I have the flu!)

[cuttlefish]

Cheers for the response tech. Its an interesting approach - and raises a bunch of additional questions for me. I've been trying to apply VSA intraday when observing 1 and 5 minute charts and can see merit in it. (the emotional discipline to read the signals without confirmation bias is still the biggest challenge if actively trading, and of course I'm only a novice in the interpretation of the volume as well).

One thing that I'm curious about in the situation you describe is the decision to hold overnight yet using such tight intraday stops. I'm assuming the tight stop is only your entry stop but once you are in profit you have more loose exit criteria. (otherwise, given that a 4c range tends to be about the minimum range for a 5 minute bar you'd be in and out much more frequently I'd imagine).

In relation to the broader day to day trend - are you using VSA for that decision or Elliot/other factors? And prior to Friday's open were you already planning to open a trade to hold overnight but waiting for some intraday confirmation, or was the decision to enter for an overnight hold made as a result of intraday activity combined with the daily charts? Or was the overnight hold decision a default based on no exit criteria being triggered by days end?

I guess I can see a lot of merit in the approach you are describing for day trading but am finding the risk inherent in an overnight hold hard to reconcile with the rest of the approach.

[MRC & Co]

Why don't you just forward test every method in your imagination on a sim, thousands of times.........you willl learn application, what suits your personality and what works for you and why. Pretty simple and probably the most important thing you will do to help your trading.

I think one of the most important things I have learnt, which is barely mentioned, is just HOW DIFFERENT the same market can be, day to day. It can act the same for 30 days in a row and then look like a completely different market which requires a completely different style, the very next day, and this can continue for an unknown period of time, before all of a sudden, it happens again. Just one reason why I don't like mechanical systems, takes too long to adapt, whereas with a discretionary approach, you can pick up this change intraday and alter your style on the spot.

[mazzatelli1000]

Why don't you just forward test every method in your imagination on a sim, thousands of times.........you willl learn application, what suits your personality and what works for you and why. Pretty simple and probably the most important thing you will do to help your trading.

I think one of the most important things I have learnt, which is barely mentioned, is just HOW DIFFERENT the same market can be, day to day. It can act the same for 30 days in a row and then look like a completely different market which requires a completely different style, the very next day, and this can continue for an unknown period of time, before all of a sudden, it happens again. Just one reason why I don't like mechanical systems, takes too long to adapt, whereas with a discretionary approach, you can pick up this change intraday and alter your style on the spot.

A bit of Linda Raschke in you :D

[MRC & Co]

A bit of Linda Raschke in you :D

Read a bit of her and I like her style.

But never heard her mention the things I said above......that is just my own experience.

[tech/a]

Cheers for the response tech. Its an interesting approach - and raises a bunch of additional questions for me. I've been trying to apply VSA intraday when observing 1 and 5 minute charts and can see merit in it. (the emotional discipline to read the signals without confirmation bias is still the biggest challenge if actively trading, and of course I'm only a novice in the interpretation of the volume as well).

When you have watched 1000s of charts it becomes clear what is about to unfold with a better chance than 50/50 often very high probability.The grey matter sees it better than the software---when its blatantly obvious BOTH agree (You'll see an alert) Practice reading each bar with the life of the bar 3-4 bars.IE if you see a high volume wide range down bar you'll know if its a capitulation or renewed selling in the next 3-4 bars.


One thing that I'm curious about in the situation you describe is the decision to hold overnight yet using such tight intraday stops. I'm assuming the tight stop is only your entry stop but once you are in profit you have more loose exit criteria. (otherwise, given that a 4c range tends to be about the minimum range for a 5 minute bar you'd be in and out much more frequently I'd imagine).

My stop is now at breakeven and the + side is more than a few cents so there is some room. My decision to buy AND hold was based on the Wave 4 unfolding in both the index and the charts trading. The quick drop on lowish volume indicated to me upside is still possible. The US futures went from negative to positive through the trading day as did the HSI and other bourses regained a lot of their initial loss.So tentitively in the water.


In relation to the broader day to day trend - are you using VSA for that decision or Elliot/other factors? And prior to Friday's open were you already planning to open a trade to hold overnight but waiting for some intraday confirmation, or was the decision to enter for an overnight hold made as a result of intraday activity combined with the daily charts? Or was the overnight hold decision a default based on no exit criteria being triggered by days end?

No I made the decision intraday.Thought that it was possible Id hold if there wasnt a reason seen that showed late sell off.It was really all intraday with one eye on the wave 4 developement in both the Index and the charts traded.All correlate.So in some ways all of your questions.


I guess I can see a lot of merit in the approach you are describing for day trading but am finding the risk inherent in an overnight hold hard to reconcile with the rest of the approach.

I havent traded for a few days so if I'm trading long I want to be on the Right side all be it this maybe the last stint for a while.Frankly I'm looking seriously at the SPI/NIKKI and HSI---you really need to be able to trade both ways!

[Wysiwyg]

I think one of the most important things I have learnt, which is barely mentioned, is just HOW DIFFERENT the same market can be, day to day.

That`s right, yet to see a same situation myself, sometimes mildly similar.Initial stop loss moved to break even or better as soon as possible.From there, good luck. :D



p.s. sorry tech/a, looks like our posts were out at the same time and didn`t mean to post over the top.

[kam75]

1. Always USE STOPS.
2. BE DISCIPLINED to your system.
3. If your trade fails to follow through, GET OUT.
4. Use SOUND MONEY MANAGEMENT.
5. Avoid all spruikers like plague. Your best trading will come from within.

regards

[mazzatelli1000]

Read a bit of her and I like her style.

But never heard her mention the things I said above......that is just my own experience.

Hahaha
Nothing wrong with the Raschke. She says she hasn't met that may successful mechnical traders and is a fond supporter of discretionary trading

[cuttlefish]

tech - thanks again for another detailed response - appreciated.

[MRC & Co]

Hahaha
Nothing wrong with the Raschke. She says she hasn't met that may successful mechnical traders and is a fond supporter of discretionary trading

Ah k, never heard her say that, but the woman can trade up a storm, that's for sure! I'm sure there are some good mechanical traders out there, there appears a couple around here and I have heard of a couple more in Australia.

Agreed Tech, need both sides at the moment. You may like Nikkei, most technical and good trends from what I hear and see.

You prob won't like HSI if you want tight stops. You will probably pay quite some slippage with the spreads and slow fills.

SPI is good, but there is a lot of BS in there, low liquidity so easier for guys to push it around, squeeze, false breaks etc.

That's my opinion anyways.

[BentRod]

"He who picks bottom gets smelly finger"

Don't know where this one came from but I remember having a giggle when Nick posted it somewhere.:D

[BentRod]

"It's not about how much you make, it's about how much you keep"

[cuttlefish]

No I made the decision intraday.Thought that it was possible Id hold if there wasnt a reason seen that showed late sell off.It was really all intraday with one eye on the wave 4 developement in both the Index and the charts traded.All correlate.So in some ways all of your questions.

Certainly proved to be a good decision - it had a nice morning run up.

[tech/a]

Yes.

[tech/a]

Sold out all positions today.
Reason
Out of the office most of tommorow.
Thats the OOTOT indicator on your drop down menu.

[strudy]

Have a trading plan set up which suits your kind of trading.

It should Comprise entry and exit strategies, your preset profit margins,stop losses margin to minimise losses just as a minimum.
And most important of all, Stick to it.

Strudy.:)

[josh_in_a_box]

Do Not do anything you cannot understand and apply.

[BrendonC]

Hey All, :)

I think the best rules for beginners are based around good money management. Cutting your losses is important but knowing when your stop loss will be before you enter the trade is very important. Never make a decision while you are in a trade when to cut your losses. Your trading plan should tell you when to enter, what price to take profits and cut losses before you even enter a trade.

There are also important lessons knowing which money management strategy is suitable for which market condition. In the current market conditions, it is important to make sure you enter stocks within a trading range, entering at pivot points near historical low support levels and make sure your stop loss lies below all the fluctation, (usully below support levels to avoid getting stopped out before achieving profit ) I also make sure that my profit target is at least 1.5 to twice my stop loss %.(Maximize your profits, Minimize your Losses). When deciding your profit target also consider the recent historical price highs over time to see what is the probability of acheiving different price levels in your desired time frame. remember we never know where prices will go, all we can do is make calculated guesses with good money manegement. diversify, diversify, diversify.

Cheers
Brendon

[It's Snake Pliskin]

Hey Brendan,

I think the best rules for beginners are based around good money management.
Some pertinence there.

Cutting your losses is important but knowing when your stop loss will be before you enter the trade is very important.
Yes, and also clicheable.

Never make a decision while you are in a trade when to cut your losses.
Clicheable again.

Your trading plan should tell you when to enter, what price to take profits and cut losses before you even enter a trade.
Not necessarily. There is some debate about targets vs letting them run out of puff puff.

In the current market conditions, it is important to make sure you enter stocks within a trading range, entering at pivot points near historical low support levels and make sure your stop loss lies below all the fluctation, (usully below support levels to avoid getting stopped out before achieving profit ) I also make sure that my profit target is at least 1.5 to twice my stop loss %.(Maximize your profits, Minimize your Losses). When deciding your profit target also consider the recent historical price highs over time to see what is the probability of acheiving different price levels in your desired time frame. remember we never know where prices will go, all we can do is make calculated guesses with good money manegement.
Not suitable for a beginner without a mentor showing what this means.

diversify, diversify, diversify.
Diversification is often quoted and is often misunderstood. Is it effective?　Yes and no.
Cheers..

1 rule from me is to learn it yourself and don't tell anyone you trade.

[BrendonC]

"Some pertinence there."
.
"Yes, and also clicheable."

"Clicheable again."
=========================

Hi Snake Pliskin,

Thanks for your feedback.
I certainly want to provide what is the most relevance for new traders. All I can comment on are lessons I have learn't and feedback from those of my graduates. For new traders I find that taking the emotion our of trading requires a set of rules to stick to and if they are shooting from the hip with new decisions mid way through a trade it can create a lot of inconsistency and inability to measure what is working and what is not. So I stilll encourage new traders to develop a mechanical system that allows them to reduce the emotional decisions mid trade. I agree clicheable but very important for new traders. I can show a trader a system that is 70% probability but if they don't follow these basic trading rules nothing will work.
=============================================

"Not necessarily. There is some debate about targets vs letting them run out of puff puff."

Yes, I agree, there are lot's of different strategies for maximizing profits. For a new trader it is important though to stick to mechanical rules which are set before you enter a trade. No one knows where a share price is going to head and many a time I have made mistakes by holding on too long thinking I will take advantgae of an exhaustion gap in a trend and that little bit more, often my biggest mistake before it tumbles back down again. If I ever want to let a stock run out of Puff to hold on for more, I would apply a scaling out strategies, which is simply selling portions of your position and leaving a little on the table after you have locked in profit. Warrne Buffet says he made an absolute fortune buying to late and selling to early. I agree completely.
================================================== =

"Not suitable for a beginner without a mentor showing what this means."

Yep I agree completely, my bad. In my next post I will show more graphic examples of trading ranges in the current markets and how each person can design their own effective money management strategies to suit their risk profile.

==================================================

"Diversification is often quoted and is often misunderstood. Is it effective?　Yes and no."


Diverisfication is something that must be applied and each trader/investor must decide how much to diverisfy depending on the strategies and trading instruments they use. Example: if trading indexes it is more difficult to diverisify compared to equities. It is very important to diversify but not too much. I will discuss a good balance of diversification based on risk and reward in my next post.

================================================== ====
"1 rule from me is to learn it yourself and don't tell anyone you trade.[/QUOTE]"

respectable quote, but I often follow principles of contribution. You get back what you give. It is difficult for begginers to learn the hard way and helping others to learn from my own lessons learnt and those of my mentors is very rewarding.

I hope this information is helpful for begginers otherwise why are we even here. :)

Cheers
Brendon