Australian (ASX) Stock Market Forum

My Trading System

Joined
Nov 10, 2007
Posts
64
Reactions
0
Hi everyone,
I'm a newbie trader and I've been reading this forum (as well as anything I can get my hands on: books, mags, other forums and all sorts of stuff on the internet) about technical analysis and I thought I would put it all out there for feedback on my system.
I thought I was ready at the end of July to get in and start trading. My first problem was that I didn't have a proper and complete system. I would read something that seemed a great idea, then check out a bunch of charts from over the last year and the majority of times that particular idea/system/indicator would come up good. I'd get all excited and jump in (usually hasitly). Sometimes it worked, sometimes not. Then as I knew I still had alot more learning to do, I'd get the next trading book and go "wow - I should be doing that!!!" and I'd repeat the above recklessness. August obviously wasn't the best time to go long in stocks and I lost a fair bit wondering what I was doing wrong. I turned my outlook around and started shorting and made most of it back.
Basically without a proper system (just borrowing bits here and there) it was more like gambling than trading so about 3 weeks ago (yeah I know - I was stupid for quite a while before I realised) I sat down and planned out my system that I would use for at least the next 3 - 6 months and along the way refine it and hopefully start making consistently more successful trades than losers.
So here is my situation and plan - I hope you gurus out there can comment and suggest what improvements I can make:

I have $5000 in a Prime Macquarie Account (Spare cash that I can afford to lose). A Prime account is pretty much a CFD account with so called extra perks (shareownership, dividends etc). Like short term loans.
I am willing to risk more than I should according to the books (2% total equity)
I am trading those shares which have 5 or 10% margins (which are mainly blue chip or top ASX 200 type companies).
I will limit myself to a max of 4 or 5 at one time - each at $5000 worth of stocks (for a total at any one time of around $20000 to $25000)

I am planning to trade short term (couple of days to a couple of weeks) at the moment because of the craziness that is happening in the stockmarket at the moment (It looks crazy to me at the moment compared to if I look at charts from the first half of the year!) I would like to trade for longer time periods (up to 3 -4 months maybe) when the market picks a direction but I think it might be safer to trade shorter time periods with smaller (but hopefully regular) profits. Any feedback on that idea???

OK onto the trading plan:

* If the market (All Ords) is in an uptrend then I'll look to go Long. If its going down I'll look for shorts.
* On weekends I'll visually scan though my available stocks on a daily Metastock chart with the GMMA in the top window (to try to determine the character of the trend) looking for stocks that in the last couple of weeks/months have been trending in the direction I want to trade.
* As I find likely suspects I put them in an Excel spreadsheet I made up as a watchlist which contains Target cost (the most extreme price I'm willing to pay), Stop loss price, Target profit Price and a few columns with varying profit % (5,10,15,20etc)
* After each trading day I come home from work and download the EOD data and check each of the stocks in my list looking for those that are making a retracement into the area between the 10 and 30 day MA.
* I look for those making retracements to turn back to the intended trend (Pivot points I think?) and determine that the trend will continue using candlesticks and confirming candles the next day.
* I calculate a Stop Loss as approx 2 % above the high or 2 % below the low point. Then calculate the max price payable as 6 % above or below the stop. That way i 'should' only ever lose the 6% plus transaction fees (approx $300 + $20 per trade = $340)
* I filter down to the best trades by looking at the GMMA and past resistance and support to hopefully find the 4 or 5 trades that will go in the direction I am trading for.
* After I have entered my trades, here is where I come to a dilemma. Later if the market starts to settle in a direction (bullish or bearish) I plan to hold these trades for longer and get out when the trend is weakening or ending. But -
At the moment I am thinking it might be better to just take small profits near the price where the trend began its retracement in case the trend doesn't continue due to short term resistance/support at the point.
Therefore I am looking for retracements where I can snatch a quick %5 profit (minus transaction fees which nets to about $200 for a week or two involvement. With 4 to 5 trades at a time it should average to $800 - 1000 in the perfect world)
I have had a few where I was at the 5% then it turned around and instead of snatching $200 - 250 I ended up either breaking even or losing.
Ideally I would like to stay in for the entire run then when I see candlesticks reversing to start another retracement - get out to lock in profits - then possibly get back in when the candles indicate a continuation of the initial trend.
I am pretty sure this is swing trading, although I read varying definitions.
* Also as my capital increases to the next $1000 I plan to up each trade by $1000 (eg when I have $8000 I will be trading 4 or 5 stocks at $8000 each) which should compund my profits while not getting to carried away (if I fall below each $1000 I will reduce the next trades appropriately).

Thats the basics of the Plan anyway. I have looked at and tried all sorts of indicators and come full circle and decided that price (candlesticks) combined with a couple of simple indicators (GMMA and 10 & 30 day MA) will be what I use.
Cheers to you if you have spent the time reading this thread (thats 5 -10 mins of your life you'll never get back!!!) and I look for to any helpful criticisms (and some nasty ones as long as they are funny). If you have any ideas to help a new guy out then please speak up. I plan to use this system for the next few months accepting that my profits will be small but am using this as a learning process. I tried paper trading but wasn't "into" it enough and didn't apply it properly. By doing this (small profits/hopefully small losses) I will be giving my broker a nice pay packet (good for him/her) and learning to fine tune my trades by using real money as an incentive.
Later I'll post my trades so you can laugh or be in awe.

So what do you think? Good, bad or retarded trading plan?
Help me to help you to help me!!!
(Whoa - I need to catch a breath after all that.....)
 
Joined
Nov 10, 2007
Posts
64
Reactions
0
OK here's what I've done so far (Including brokerage of $20 per buy or sell)

19Nov07: Shorted BBG x 350 @ $14.20
28Nov07: Closed BBG x 350 @ $14.51
Final Loss: $148.50

19Nov07: Shorted CNP x 750 @ $6.65
26Nov07: Closed CNP x 750 @ $6.40
Final Profit: $147.50
(I got scared and moved the auto stop loss to above the previous days candle high - then the price jumped up stopped me out then continued down!)

19Nov07: Shorted PPX x 2000 @ $2.50
04Dec07: Closed PPX x 2000 @ $2.36
Final Profit: $240

21Nov07: Shorted WAN x 390 @ $12.90
03Dec07: Closed WAN x 390 @ $12.54
Final Profit: $100.40

29Nov07: Shorted MIG x 1700 @ 2.98
29Nov07: Closed MIG x 1700 @ 3.12 (auto stop loss while at work!)
Final Loss: $278

Running P/L: + $61

Currently holding:

Shorts: ABS, SUN
Long: COH

Will update as events unfold....
 
Joined
Nov 20, 2005
Posts
758
Reactions
0
kingie_d,
Congratulations on thinking out a trading plan. There are a few area's that need some comment, but I don't have time at present but will add over the coming days.

The first point is your understanding of the 2% rule. This rule dictates that you risk a small portion of your account on each trade. It does NOT dictate that you place your stop 2% away from entry. The reason is because each and every stock operates on different levels of volatility. Some stocks swing 5% in a day, other rarely move 1/2%. By using a fixed 2% stop from entry across all stocks will leave you within the markets 'noise' or dilute your gains when you get it right.

Money management is not part of the entry/exit mechanism. Its an overlay that is added AFTER the entry/exit mechanism has been determined. Therefore, you must decide where you will enter and where you will place the protective stop. This level is best determined by a technical level, say support or resistance or pivots etc.

Once you determine the protective stop level, you THEN quantify how many shares to buy. Now you have mentioned leverage, so we need to use some common sense.

You have $5k of your OWN money. That's it! Risk 1% or 2% of that amount. Forget the leveraging altogether.

Here is how it works:-

Buy signal= $1.00
Protective stop = $0.95
Risk = $0.05
Capital = $5,000
Risk = 2%

Therefore,
.02 x $5,000 = $100

$100/.05 = 2000 shares

Cost of purchase = $2,000

You are applying the fixed fractional rule to your own capital. You are using the leverage to help fund the positions which can't be done without using leverage.

Now, you would naturally have numerous positions as per above. Let's say you have 8. Without leveraging you can't fund 8 positions (unless they're all penny stocks). With leveraging you can now fund all positions AND retain the risk management of your OWN capital.


This post may contain advice that has been prepared by Reef Capital Coaching ABN 24 092 309 978 (“RCC”) and is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.
 
Joined
Jun 7, 2007
Posts
336
Reactions
0
KINGIE,

I think medium term swing trading is a decent place to start.

firstly though - are you using any form of trading software ?
 
Joined
Nov 10, 2007
Posts
64
Reactions
0
Nick,
Cheers for the comments. Thats the best explanation of the 2% rule I've seen so far. It makes much more sense now and I'm gonna have to think about using it properly.
What I figured was that as I only have a small capital base to start with, I'll have to up my risk per trade to 5 or 6 % due to transaction fees per completed trade being nearly 1 % of my total cash.

Therefore, as I plan to risk say 6% I would work out where my stop will be, which on the attachment of WAN is 2 % above the high point ($13.26) of the rally as, I think, that high should provide resistance (lower lows and lower highs in a downtrend) and I will allow the 2 % above it for volatility.
Initial stop loss @ $13.52.
Then I want to risk 6 % so I calculate 6% below the stop loss to get the lowest price I will pay to get into the trade.
Max Entry $: 12.71
Hopefully I will get in at a better price than that and therefor have less on the line to lose but if thats my entry (based on opening price for the next day (Day B)) and it all goes horribly wrong then I'll only lose the 6 %.
That is how I plan to set stops and entry prices but using the proper 2 % rule might be a better money management plan (even if I bump the % to 5 or 6 and then apply the rule as you described it)

I am worried about the reliabilty of trends at the present time due to the market doing whatever crazy things the US market is doing and I think short term trades might be safer (balancing out the lower returns).
Thats why, if my max entry $ is 12.71 and the next support price is @11.94 (C on the attachment) then I should be able to "safely" lock in 6.4 % but I'd settle for 5%.
I don't know if this is smart to settle for small profits by being "defensive" in a volatile market or if it is stupid to risk 6% for a return of 5 or 6%
 

Attachments

Joined
Nov 10, 2007
Posts
64
Reactions
0
Julius,
Im using Metastock now which is much better than using free internet charts from SMH (which I did at first before I coughed up for MS). At least now I can play with indicators and trend lines properly.

What do you class as medium term? Up to a couple of weeks?

If I was to stay in trades past the 5% (or whatever the point C of WAN is) then what do you guys recommend as a trailing stop? I've been reading a few Daryl Guppy books lately and the 3 Countback Line looks promising.
 
Joined
Jan 3, 2007
Posts
940
Reactions
2
You still do not have a clear concept of position sizings and the difference between money management and actual stops.

I would suggest you go and read the book, "Trade your way to Financial Freedom", by Van Tharp, before proceed further with actual trading.

The general fixed percentage position sizing rule is not to risk more than 1% of your account equity per trade. How far you place your stop as a percentage from the "stock" price is a completely different matter. Position sizing is "HOW MUCH TO BUY", and NOT "HOW FAR SHOULD I SET MY STOP".

In theory, I could buy a penny stock at a price of $1.00, set a stop where i would exit the trade if the stock drop by 25%. Thus, I would risk 0.25 cents per stock.

If I had an account size of $10,000, and I would like to risk no more than 1% of that equity per trade, I would buy $100 / $0.25 = 400 of that stock at a total price of $400.00. You will see that if your commission is extremely high, like $29.95 per trade, it would limit your ability to practice your position size strategies.

In practice, an account size of $5,000 with an average trading commission of $30.00 is impossible to "trade" with any reasonable position size strategies.

What can you do?

1.) Try a different broker like interactiver brokers for USD $1 commission on US shares, or AUD $6 for local shares.
2.) Increase your capital before trading.
3.) Trade leveraged vehicles only, such as forex using mini-lots as starters. (not recommended for you at all as you have not grasped the essential of position sizing)
4.) Don't trade at all, just invest. :)

Hope this helps.
 

>Apocalypto<

20.03.2012
Joined
Feb 2, 2007
Posts
2,233
Reactions
0
You still do not have a clear concept of position sizings and the difference between money management and actual stops.

I would suggest you go and read the book, "Trade your way to Financial Freedom", by Van Tharp, before proceed further with actual trading.

The general fixed percentage position sizing rule is not to risk more than 1% of your account equity per trade. How far you place your stop as a percentage from the "stock" price is a completely different matter. Position sizing is "HOW MUCH TO BUY", and NOT "HOW FAR SHOULD I SET MY STOP".

In theory, I could buy a penny stock at a price of $1.00, set a stop where i would exit the trade if the stock drop by 25%. Thus, I would risk 0.25 cents per stock.

If I had an account size of $10,000, and I would like to risk no more than 1% of that equity per trade, I would buy $100 / $0.25 = 400 of that stock at a total price of $400.00. You will see that if your commission is extremely high, like $29.95 per trade, it would limit your ability to practice your position size strategies.

In practice, an account size of $5,000 with an average trading commission of $30.00 is impossible to "trade" with any reasonable position size strategies.

What can you do?

1.) Try a different broker like interactiver brokers for USD $1 commission on US shares, or AUD $6 for local shares.
2.) Increase your capital before trading.
3.) Trade leveraged vehicles only, such as forex using mini-lots as starters. (not recommended for you at all as you have not grasped the essential of position sizing)
4.) Don't trade at all, just invest. :)

Hope this helps.

Temjin,

you trading your own money in the market yet??
 
Joined
Jan 5, 2006
Posts
4,461
Reactions
0
You still do not have a clear concept of position sizings and the difference between money management and actual stops.

I would suggest you go and read the book, "Trade your way to Financial Freedom", by Van Tharp, before proceed further with actual trading.

The general fixed percentage position sizing rule is not to risk more than 1% of your account equity per trade. How far you place your stop as a percentage from the "stock" price is a completely different matter. Position sizing is "HOW MUCH TO BUY", and NOT "HOW FAR SHOULD I SET MY STOP".

In theory, I could buy a penny stock at a price of $1.00, set a stop where i would exit the trade if the stock drop by 25%. Thus, I would risk 0.25 cents per stock.

If I had an account size of $10,000, and I would like to risk no more than 1% of that equity per trade, I would buy $100 / $0.25 = 400 of that stock at a total price of $400.00. You will see that if your commission is extremely high, like $29.95 per trade, it would limit your ability to practice your position size strategies.

In practice, an account size of $5,000 with an average trading commission of $30.00 is impossible to "trade" with any reasonable position size strategies.

What can you do?

1.) Try a different broker like interactiver brokers for USD $1 commission on US shares, or AUD $6 for local shares.
2.) Increase your capital before trading.
3.) Trade leveraged vehicles only, such as forex using mini-lots as starters. (not recommended for you at all as you have not grasped the essential of position sizing)
4.) Don't trade at all, just invest. :)

Hope this helps.
Great post.

I was going to post my views but I realise no need when I saw what you wrote.
 
Joined
Nov 20, 2005
Posts
758
Reactions
0
I am willing to risk more than I should according to the books (2% total equity)
Now there is a reason books and people like me tell you to trade at 2%. Similar to the reason there are speed limited through school area's. I appreciate the dilemma you and so many other new traders face - there is so much crap out there you don't know if you're Arthur or Martha. But, out of the fluff, there is this 2% rule that should be adhered to. The only thing you can control is the amount of money you're willing to lose. You cannot control any other aspect of the trading equation. The 2% rule (or fixed fractional position sizing) will do that for you.

I have $5000 in a Prime Macquarie Account
As has been pointed out, this is not enough capital to take a good go at being successful at trading. The ratio of comm's to possible returns is simply not a plausible business model. Trading US stocks at 1c per share would obviously help, but you just can't get those kinds of rates in Australia (yet). This dilemma will also be exacerbated as you intend to trade shorter term. Shorter term = more comm's and less possible gains to outweigh. You have also mentioned volatility as a factor. The way you can overcome both of these is to trade longer term trend following. These types of things work in your favour; less comm's, overnight or day to day volatility don't impact, larger prices swings are caught, increased expectancy, lower stress, slippage is almost a non-event, you will receive dividends etc etc. On the flip side you will be paying interest on the carry. However, if you size the positions (as per my first post) correctly you will find that the interest charges will be greatly reduced compared to your original 'equal dollar' allocation.


This post may contain advice that has been prepared by Reef Capital Coaching ABN 24 092 309 978 (“RCC”) and is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.
 
Joined
Jan 3, 2007
Posts
940
Reactions
2
Temjin,

you trading your own money in the market yet??
Yes if you meant do I have money in the market, but it's a family portfolio and limited trading involved. (medium term trading)

No if you meant if I am trading my own personal system (short term) which is still under development. ;)

I am willing to risk more than I should according to the books (2% total equity)
In addition to Nick's comment, you may "FEEL" that you can trade 2% of your total equity now because 2% of $5000 is only $40, and psychologically, most people can handle such a lost. However, you need to detach yourself from that value and exam the risk from a whole portfolio perspective.

Anyone who develop mechanical systems here and backtest them with drawdown values will be able to tell you anything more than 2% is extremely risky and lead to a high chance of risk of ruin and extremely high drawdown.

In my opinion, you are over-estimating your probability of getting winning trades and under-estimating your chances of getting a series of losing trades. (I think this one is the outcome bias right? need to check...)

Anyway, a lost of 10+ trades in a row is not uncommon for mechanical/discretionary traders. (emphasised in lots of books) But if you risk more than 5% per trade, you are looking at 50%+ drawdown by simple multiplication.
 
Joined
Nov 10, 2007
Posts
64
Reactions
0
Cheers to everyone for the advice.
I never realised that the money management / position sizing was such an important part of a trading plan (because its usually covered last in books and I figured it was more important to people with a large amount of cash). It obviously is very important as this is the first and main issue that you guys have brought up. My focus was more on possible profits rather than risk per trade. (In retrospect that is more of a "get rich quick" mentality - which is not the best thinking for a new trader)
I will adjust my trading plan to take into account the correct use of the 2 % rule, which also answers my other dilema by default. If I'm going to use the 2 % rule then my total $ per trade will probably be less than the $5000 which I originally intended, so I won't be able to snatch quick 5 percenters over short terms. I will have to change my time periods to medium term instead of jumping in too deep with fast and furious short term trades.
Should I still use the swing trading techniques to time my entries into trends?
What are your opinions on the GMMA and ADX for determining character of trends?
 
Joined
May 19, 2007
Posts
208
Reactions
0
What are your opinions on the GMMA and ADX for determining character of trends?
There is nothing wrong with those indicators... it is the knowing or application of the indicators which you use that makes the difference.

If the GMMA indicates the difference between the short-term and long-time players and you use it in that way, then OK.

But, using an indicator simply for the sake of an indicator will not help you. Know why you are using an indicator and using it to the best on your ability (hopefully) will keep you right side.

Tim

PS. Check out http://tradermike.net/2004/05/another_look_at_multiple_moving_averages/ for some stuff on GMMA.
 
Joined
Nov 10, 2007
Posts
64
Reactions
0
tccoaates,
I checked out that site - theres some good stuff there - not just the GMMA but also other stuff. Do you use the GMMA in your trading?

Temjin,
I went out and got that book today too. Van Tharp is one of the authors I've read alot about, but never one of his books.

I've been reading up alot on position sizing - definiately going to be a MUST in my future trading....
 
Joined
Jan 3, 2007
Posts
940
Reactions
2
In addition to Nick's comment, you may "FEEL" that you can trade 2% of your total equity now because 2% of $5000 is only $40, and psychologically, most people can handle such a lost.
heheh I just realise I made such a stupid mistake here. :D My apologies. haha :banghead: (where the hell did I pull that $40 number anyway????!! hah)

kingie_d said:
Temjin,
I went out and got that book today too. Van Tharp is one of the authors I've read alot about, but never one of his books.

I've been reading up alot on position sizing - definiately going to be a MUST in my future trading....
That's great! I suggest you finish reading the book first before going back into trading. Dr Van Tharp's material has gave me a lot of inspirations and a core framework to start from.

Feel free to ask questions here as you read the book. There are quite a lot of knowledgeable people here with far more trading experience than I do.
 
Joined
May 19, 2007
Posts
208
Reactions
0
I checked out that site - theres some good stuff there - not just the GMMA but also other stuff. Do you use the GMMA in your trading?
ACtually, I don't use the GMMA. I have a few of Guppy's book which is why I know a bit about that indicator. The problem that I had with GMMA was using it effectively. But here you have to go back to the mid 90's when scans (in my view) were a but cumbersome and I was a bit green also.

But if you like the GMMA stick with it.

Tim
 
Joined
May 12, 2005
Posts
2
Reactions
0
Hey guys,
glad you are having this very important discussion. But i think there are many things to consider when developing a trading system that Kingie is bringing to light, as are the more experienced.
Firstly, i agree with those that comment that having enough 'trading captial' is important to realize. i say. realize, because when we start out we often really want to believe that being under-capitalised is something " I will overcome with sheer talent!". It is not until years have passed trying different un substantiated theories and paying some of our salary back into out dwindiling trading account balances , kidding ourselves by saying things like," that was a hard lesson, i will do this now......, I will make it back fast etc".....and pretending that only NOW are we really starting to TRADE, and forgetting how much we have really lost by massaging the trading results in a O Trader software etc etc.....and lying to our friends and family how much we are making 9 actually losing...). "so close to giving up our day job right??.........Believe me i am not being cynical but are EGo's are one of the hardest things to conquer in this game.....we just can't accept the hard work it actually takes to be rigorous and painstaking in the research necessary....to be really successful....
I am now at a fairly new stage....i have given up on pure technical analysis which i have found to be just a derivation of price data anyway.....and I am looking at hard evidence thru backtesting in a systematic way via Tradesim...
I admit after much time floundering in some rather uncontrolled manner and being stressed out by some discretionary rubbish methods.....that a very business like and scientific approach is best for my personality...and that's really the key...to find out what gives you confidence to trade whatever method you choose, and following your rules.......personally, i am aiming to save about 50 K for my own style of trading......most businesses start with much more so why should trading be any different? My current system back-tests over ten years with an rate of return of 50% per annum on a random walk top 200 share basis. it is also robust, in that it works for many other stock exchanges. The system is derived purely from price, not derived indicators.....it has minor draw-downs less than 5% of total capital, it follows 1.5% risk per trade and has an average win/loss ratio of 3:1.....it is a trend following system i adopted from Turtles trading methods.....
It works from daily charts, with an ATR based stop system., accuracy 65% wins...........there are many other aspects i understand about my system and it is purely mechanical.....even so......I have yet to forward test it for at least 6 months before committing serious capital.....
The point is, i realise there are not many real short-cuts in developing your own trading style and sytem.......I would say only risk minor capital on untried systems.....we all want to trade today, but i think it takes courage to admit our failings and learn enough to move onto something that will actually deliver that we wish for.......
 
Joined
Jan 5, 2006
Posts
4,461
Reactions
0
I am now at a fairly new stage....i have given up on pure technical analysis which i have found to be just a derivation of price data anyway.....and I am looking at hard evidence thru backtesting in a systematic way via Tradesim...
I admit after much time floundering in some rather uncontrolled manner and being stressed out by some discretionary rubbish methods.....that a very business like and scientific approach is best for my personality...and that's really the key...to find out what gives you confidence to trade whatever method you choose, and following your rules.......
Good stuff bro, I agree wholly.
In fact, it could have easily been me who said that what is quoted above.

Late in my discretionary days I just stopped trading. I just couldn't do it anymore because I realised I had no clue what i was doing (even though I was making money, Hey its a bullmarket). How and why should I stick to some set of rules without even knowing if the system I used was even a profitable one?
 
Joined
Nov 10, 2007
Posts
64
Reactions
0
Hi guys,
I thought I would get back onto this thread for an update. I have taken alot of your opinions (not allowed to say advice) seriously. I finished the book "Trade your way to Financial Freedom", by Van Tharp a while ago and I think it has to be one of the best - if not THE best that I've read so far. It has info on system creation for yourself rather than most of the other books which tell you THEIR system and show charts which display how great THEIR system of entries is. I now understand that entries is NOT the be all and end all of good trading.
I have altered my system which has now proved to be more successful in both returns and confidence. I still use the pivot points as stops but now use proper position sizing - although I use 3% of my capital (which will probably cop a barrage of "too much!"). The use of position sizing has put me into some trades where the price move was quite good but my return was only say 2R or 3R. Those ones I thought to myself "Oh I could have made so much more if I have a larger amount of shares" - BUT - kicking yourself over could ofs and would ofs is a bad mistake so I don't do it any more. Correct position sizing has also put me into trades where I lost - but kept my loss to my 3% target which has also made me see the real value of position sizing - risk management to be able to stay in the game and ride out losing streaks.
While my entries are still basically the same and I have incorporated position sizing as my final filter, I am still tossing up over exits.
I am using the pivot point as an initial stop then using a 2 x ATR as a trailing stop. But, I have included ATR bands to try to determine if a stock is running away to quickly. If it closes a couple of days outside the bands then I will tighten my stop to 1 ATR to protect profits with the intention that if I get stopped out then I will look for another entry into the stock when it continues the trend. This has effectively made my system fairly short term and as I have a small capital base the transaction fees are quite a significant factor. I have considered changing to a longer time frame but one thing I read in Van Tharp is that you need a system that suits YOU so I wont change my timeframe. One of the suggestions you guys made is to increase capital to make transaction costs less significant. This makes sense to me. Later in the year I will be deployed back to the Middle East so I'll be coming back with a nice amount in my bank account. Therefor if I continue with my small capital base now - which should give me a years worth of trading experiences, then by the time i can increase my capital then I should at least not be a total newb.
I think my system and the way I think about trading has changed (hopefully for the better) and will continue to read and learn and adjust as i see neccessary. Cheers for the helpful feedback - look forward to more
 

Similar threads

Top