Advice on short term trading approach

Hi,

I'm new to trading and have recently been devouring as much information as I can. I've been reading various books from pure TA charting books to the classics like Elders - Trading for a Living. I've been very interested in all of them. I have Metastock and EOD data and have just been investigating and looking at various charts and indicators and the like.
When I eventually get around to actually putting my money on the line I imagine I'll be trading EOD data for trades from 2days to weeks+.
After reading all these books I'm finding that I'm a bit lost as to the next step to take.
So, I'm hoping some of you more experienced individuals out there can give me some advice as to how you think I can move forward?
Yes, I understand from the books about lagging indicators and leading indicators and breakouts and so on - and I've read the importance of risk and money management and discipline.
What I'm struggling with is where to go from here? I've no real idea about what type of system/indicators I should use, what setups I should use and what type of setups I should trade.
As a beginner, is just trying to swing/trend trade the best place to start with some MAs and RSIs?
Or try and begin looking at breakouts through support and resistance levels?
Or pullbacks using RSI with a trend?
I suppose what I'm asking is, 'if you were me, with the benefit of hindsight, what would you do over the next 1 - 6 months in order to get to point were you have some idea as to your aims and strategies for trading?'. As I say, I need some kind of direction for the coming months.

I don't know anyone who actually trades so I've no one to talk to about this, I hope some of you can give me a few minutes of your time to help me progress a little further.

U need to find out what trading style works for u, what u feel comfortable with.

So open a dummy account somewhere and paper trade for a while and see how u go.

chesl73 said:

I suppose what I'm asking is, 'if you were me, with the benefit of hindsight, what would you do over the next 1 - 6 months in order to get to point were you have some idea as to your aims and strategies for trading?'.

Click to expand...

You are going to get lots of differing opinions, here's mine.

You need to understand what moves the price. A good start is Volume Spread Analysis.
There is a firm that sells 'education' and software about VSA, you don't need this.
Find a book called "Master the Markets". It is available free out there in P2P land, and I have even seen some legal downloading links to get it for free.
Start with this book.

Read the posts on ASF from tech/a and motorway. Find tech/a's posts on VSA and motorway's posts on Wyckoff analysis. (VSA is a small part of Wyckoff analysis, this is the next step after VSA).

Then start to try to look at the price action yourself and understand it, VSA/Wyckoff will get you started on this.

Throw away your books by Elder. Give me a list of other books you have so I can advise you on which ones to throw away.

Finally, ignore what anyone else says.

Timmy said:

You are going to get lots of differing opinions, here's mine.



Throw away your books by Elder.

Click to expand...

Your off to a good start sparking interest Timmy.

Cheers,


CanOz

chesl73 said:

Hi,

I'm new to trading and have recently been devouring as much information as I can. I've been reading various books from pure TA charting books to the classics like Elders - Trading for a Living. I've been very interested in all of them. I have Metastock and EOD data and have just been investigating and looking at various charts and indicators and the like.
When I eventually get around to actually putting my money on the line I imagine I'll be trading EOD data for trades from 2days to weeks+.
After reading all these books I'm finding that I'm a bit lost as to the next step to take.
So, I'm hoping some of you more experienced individuals out there can give me some advice as to how you think I can move forward?
Yes, I understand from the books about lagging indicators and leading indicators and breakouts and so on - and I've read the importance of risk and money management and discipline.
What I'm struggling with is where to go from here? I've no real idea about what type of system/indicators I should use, what setups I should use and what type of setups I should trade.
As a beginner, is just trying to swing/trend trade the best place to start with some MAs and RSIs?
Or try and begin looking at breakouts through support and resistance levels?
Or pullbacks using RSI with a trend?
I suppose what I'm asking is, 'if you were me, with the benefit of hindsight, what would you do over the next 1 - 6 months in order to get to point were you have some idea as to your aims and strategies for trading?'. As I say, I need some kind of direction for the coming months.

I don't know anyone who actually trades so I've no one to talk to about this, I hope some of you can give me a few minutes of your time to help me progress a little further.

Click to expand...

Hi Chesl73,

my overriding sense of what I would do in your shoes now, is probably to start very small (ie either virtual trading so none of your own money), or simply buy an index (ASX or Dow), put in a reasonable stop loss, and get a feel for what is going on.

I think an index to start with would be a lot easier than picking a stock.

Bear in mind (no pun intended), that both the ASX and Dow look set to test the resistance levels of 5000 and 10 000 respectively, and from there it would appear that they may either break through (remarkable) or turn down if they cannot break the resistance.

Therefore stop losses or monitoring risk is important

Hope that helps

Tim

Timmy said:

You are going to get lots of differing opinions, here's mine.

You need to understand what moves the price. A good start is Volume Spread Analysis.
There is a firm that sells 'education' and software about VSA, you don't need this.
Find a book called "Master the Markets". It is available free out there in P2P land, and I have even seen some legal downloading links to get it for free.
Start with this book.

Read the posts on ASF from tech/a and motorway. Find tech/a's posts on VSA and motorway's posts on Wyckoff analysis. (VSA is a small part of Wyckoff analysis, this is the next step after VSA).

Then start to try to look at the price action yourself and understand it, VSA/Wyckoff will get you started on this.

Throw away your books by Elder. Give me a list of other books you have so I can advise you on which ones to throw away.

Finally, ignore what anyone else says.

Click to expand...

Thanks Timmy. Looking on Amazon for 'Master the Markets'. There's a book that's no longer available by Tom Williams and there's a book my Mark Douglas which has is called 'Trading in the Zone: Master the Market...'.
Which one is it?

Other books I've got (ebooks), I've read some and haven't read others would be:
John Murphy - TA of the Financial Markets
Elder - Trading for a living/Come into my tradin oom
Farley - The master swing trader
Appel - Technical Analysis
and a book on Candlesticks.
Some other authors:
Guppy, Thomas Carr, Mark Douglas, Kaufman.

I'll check out what I can on VMA.

Here is a link for a free download of Master The Markets:

http://www.tradeguider.com/mtm_251058.pdf

chesl73 said:

I suppose what I'm asking is, 'if you were me, with the benefit of hindsight, what would you do over the next 1 - 6 months in order to get to point were you have some idea as to your aims and strategies for trading?

Click to expand...

Develop a trading philosophy that suits me. Read everything I can. Go to various forums and read the different strategies that people post up, and see what clicks with me. I wouldn't use those strategies, but adopt ideas that I like. Read as much good trading discussion as I can, and maybe check out 'live' threads to see what people are saying. Their opinions themselves may not be valuable, but knowledge of their opinions can be. This is what I have done, and I wouldn't change anything if I was to start over, apart from doing it in less time .

As for specifics, I would just continue to question myself on price movement (for better or worse, I don't currently think beyond price movement). Why is price moving like it is? What is the shape of the movement? What impression does it give me? What does it seem the market thinks? What might other traders think? How is price likely to act when it reaches support or resistance? What will happen if it breaks? What will happen if it fails? What does all of this look like? How much can I gain from this move? Is the potentional move large enough? etc etc. I ask myself a lot of questions anyway, so this is a natural process and what I feel works best for me.

Thanks Timmy.

Mr J said:

Develop a trading philosophy that suits me. Read everything I can. Go to various forums and read the different strategies that people post up, and see what clicks with me. I wouldn't use those strategies, but adopt ideas that I like. Read as much good trading discussion as I can, and maybe check out 'live' threads to see what people are saying. Their opinions themselves may not be valuable, but knowledge of their opinions can be. This is what I have done, and I wouldn't change anything if I was to start over, apart from doing it in less time .

As for specifics, I would just continue to question myself on price movement (for better or worse, I don't currently think beyond price movement). Why is price moving like it is? What is the shape of the movement? What impression does it give me? What does it seem the market thinks? What might other traders think? How is price likely to act when it reaches support or resistance? What will happen if it breaks? What will happen if it fails? What does all of this look like? How much can I gain from this move? Is the potentional move large enough? etc etc. I ask myself a lot of questions anyway, so this is a natural process and what I feel works best for me.

Click to expand...

Thanks for the reply. I have been trawling through this forum recently and reading discussions. I don't find that many posts with people really discussing their strategies or setups. I think I'd find it helpful to see how others trade, is it looking for reversals and jumping on a trend, is it breakouts, is it pull-backs or whatever and maybe how they approach each trade. I suppose people keep their theories/strategies to themselves.

chesl73 said:

Thanks for the reply. I have been trawling through this forum recently and reading discussions. I don't find that many posts with people really discussing their strategies or setups. I think I'd find it helpful to see how others trade, is it looking for reversals and jumping on a trend, is it breakouts, is it pull-backs or whatever and maybe how they approach each trade. I suppose people keep their theories/strategies to themselves.

Click to expand...

There are plenty of threads here where people discuss semi-real time setups.

Flags and pennants
Fib retrace and pull back trades
Elliot wave debate
Potential breakout alert

Just to name a few.

Hang around the forum and these are the more active threads so you bound to see them. Use the search function.

Invest a few 100$s and join "The Chartist"
Here you'll be able to follow and even shadow trade Nick Radge.
Who is a professional trader who has traded on the SFE and the Chicago floor.
He is trading 4 portfolio's satisfying short to longer term traders.
Easy to follow and the cheapest most intense education you'll get in Australia.
Oh and he's licienced and all 4 portfolio's are in profit.

chesl73 said:

I suppose people keep their theories/strategies to themselves.

Click to expand...

I suppose some do and some don't. My strategy is pretty simple in theory, I aim to trade waves and support/resistance. By 'wave', I mean a move on a longer timeframe (usually on the 1hr to weekly charts), and use support and resistance to time entries (which usually appear as pullbacks). I also use S&R to make faster trades independent of the big picture.

I think sharing general strategy and theory is fine, as it is how we trade it that truly matters. I believe in the discussion of ideas, not spelling everything out with specific examples. I think that encourages us to think for ourselves, and it's more deserving and satisfying when we get there, at least that's the case for me.

chesl73 said:

Hi,

I'm new to trading and have recently been devouring as much information as I can. I've been reading various books from pure TA charting books to the classics like Elders - Trading for a Living. I've been very interested in all of them. I have Metastock and EOD data and have just been investigating and looking at various charts and indicators and the like.
When I eventually get around to actually putting my money on the line I imagine I'll be trading EOD data for trades from 2days to weeks+.
After reading all these books I'm finding that I'm a bit lost as to the next step to take.
So, I'm hoping some of you more experienced individuals out there can give me some advice as to how you think I can move forward?
Yes, I understand from the books about lagging indicators and leading indicators and breakouts and so on - and I've read the importance of risk and money management and discipline.
What I'm struggling with is where to go from here? I've no real idea about what type of system/indicators I should use, what setups I should use and what type of setups I should trade.
As a beginner, is just trying to swing/trend trade the best place to start with some MAs and RSIs?
Or try and begin looking at breakouts through support and resistance levels?
Or pullbacks using RSI with a trend?
I suppose what I'm asking is, 'if you were me, with the benefit of hindsight, what would you do over the next 1 - 6 months in order to get to point were you have some idea as to your aims and strategies for trading?'. As I say, I need some kind of direction for the coming months.

I don't know anyone who actually trades so I've no one to talk to about this, I hope some of you can give me a few minutes of your time to help me progress a little further.

Click to expand...

The next step is to test some strategies that you think may suit you. You have to develop your own. No use to use someone elses because its unlikely to suit your personality, risk profile etc. But..., you may use bits and pieces. For example, my strategy that I started in '02 was:

1. Use only price, volume and OBV. Ignore all other indicators.
2. Ignore all tips, advice, fundamentals, news items and other rumours.
3. $50,000 starting equity, Use 2% rule, diversify into at most 6 stocks at any one time.
4. Trade only stocks between 0.50-5.00.
5. Minimum reward/risk 3:1
6. Stops to breakeven ASAP after breakout.

...and a few other things I'm sure you can work out. The most important thing to have is a Trading Plan for every trade you place an order for.

Hi chesl73,

One of the obvious next steps is to develop a trading plan which will include (amongst other things) finding a method / trading set-up which should take into account your personality, risk profile, etc. This has already been suggested by others...

The problem I can envisage with this though is how do you actually choose which particular method to use? After reading some TA books you may decide to trade a particular chart pattern set-up or focus on break-out type set-ups, etc ,etc.

However, with no previous knowledge of trading how can you be confident that your chosen approach will stand a reasonable chance of being profitable ???

To overcome this, IMO you have two options.

1. You can either dedicate sufficient time to looking at charts so that you can understand for yourself how price moves. Remember that different charts will exhibit different "chart characteristics". For example, a chart for Gold will have different characteristics than a chart for BHP which will have different characteristics than a chart for the XAO Index, etc etc.

2. The other approach is to go down the path of Mechanical trading. There are pro's and con's for both approaches but one of the pro's with this approach is that you can code and test a particular idea on a range of instruments over many time periods and get a result straight away. By repeating this process you can gain a very good feel for what works (and more importantly what doesn't) in a shorter time than with approach #1.

Whatever approach you use though, it is vital that you really understand your chosen method and have confidence in it otherwise as soon as you start having some losses (which you will !!!) you will be very tempted to simply drop it in search for another method and by doing so become the next new member to the "Beginners Circle" club......

PS. You do have another option, which is to find a suitable Mentor/Educator whom you can "shadow" and learn from. This approach should help accelerate the learning process and get you to a stage where you are then confident enough to branch off and explore other ideas/approaches for your self.

As Tech/A has already stated, Nick Radge offers such a service, which for the record, I too, would recommend.

Chorlton

That's exactly right, finding your own strategy that works for you personality and risk profile is easier said than done and this is the crux of the problem for me.
For now I'm happy reading and making notes and just trying to take snippets of information/ideas that might be of interest to me.
I looked at the chartist website and this does look very appealing as I can use it as a 'mentor' which I can use to learn from and understand how an experienced trader approaches things.

Timmy said:

You are going to get lots of differing opinions, here's mine.

You need to understand what moves the price. A good start is Volume Spread Analysis.
There is a firm that sells 'education' and software about VSA, you don't need this.
Find a book called "Master the Markets". It is available free out there in P2P land, and I have even seen some legal downloading links to get it for free.
Start with this book.

Read the posts on ASF from tech/a and motorway. Find tech/a's posts on VSA and motorway's posts on Wyckoff analysis. (VSA is a small part of Wyckoff analysis, this is the next step after VSA).

Then start to try to look at the price action yourself and understand it, VSA/Wyckoff will get you started on this.

Throw away your books by Elder. Give me a list of other books you have so I can advise you on which ones to throw away.

Finally, ignore what anyone else says.

Click to expand...

Timmy

Check out the chart below.
Can you tell me what's wrong with a system that gave buy signals at the blue arrows?

bunyip said:

Timmy

Check out the chart below.
Can you tell me what's wrong with a system that gave buy signals at the blue arrows?

Click to expand...

Yeh.
Seeing them today.
Let me see some charts realtime.
Any trigger a buy signal today?

To the Question.
Kams on the money.
I'll add,skew your R/R to high win ratio 80% with < 5R/R.

tech/a said:

Yeh.
Seeing them today.
Let me see some charts realtime.
Any trigger a buy signal today?

To the Question.
Kams on the money.
I'll add,skew your R/R to high win ratio 80% with < 5R/R.

Click to expand...

I didn't see 'em today, Sunshine....I bought into this trend on 21/8/09 and I've added to my position twice since then.
As for your request to 'let me see some charts realtime'......that wouldn't be a problem. But I see no reason why I should alert you to trading signals in the markets I trade, nor do I in any way feel obliged to prove my trading ability to you.
You want trade setups, find your own.

well im of the same opinion that your chart means squat also . bit like the EW hindsight wave count fittings that used to get posted on a regular hinddsighted basis ..........

your chart merely just another example of fitting whatever that suits best after the fact

if you wish to post them live after entry , thats lovely ...........

if not and want to post them way down the track with points that say "i told you so " thats fine too but i,ll still think they aint worth squat to me

no offenses intended