I Want to be a Trader

[snsdmonkey]

Hi everyone, long-time lurker here. I've recently set up a blog just for my own purposes but I thought I'd share it with you guys since this community has been a big part of where I am right now: http://iwanttobeatrader.blogspot.com.au/

Disclaimer: not sure regarding the legalities of typing up information from a book like that, could someone enlighten me?

So where am I right now? I'm just about to start my 4th year of university, I turned 18 at the end of 1st year and immediately started mining stocks, just getting a feel for the market. I've always had a passion for the stock market and trading in general. You know those role-playing games? Yeh I'd be the merchant. I knew my basic charts, charting patterns but I had no sort of risk management, money management, trading plan etc. Fast-forward 2 years and I'm sitting in internship interviews, getting drilled on my trading performance (which isn't bad at all but mainly piggy-backing on biotech stocks such as ISN and NEU). But when you're getting drilled on your risk-adjusted rate of return and other forms of performance measurements, it's hard to reply unless you're really confident on what you're doing. Needless to say, in a tough market these days, I wasn't offered a position for this summer.

I guess this is a thread, like many others which have been set up on ASF, detailing my journey. I'd appreciate it a lot if you guys would follow my blog and give me comments and criticism as I'll be updating it regularly. I hope to be trading with a positive expectancy by the end of the year and get to know you all a little better.

But most of all, I want to set myself up for the future. I hope to at least be actively trading in my spare time but ultimately land myself a job straight out of university, doing what I love.

I envision this thread to be a complement to the blog (which will help me jot down thoughts and information from the books I'll be reading as well as any advice you guys can give me) and include charts that I'll draw up of trades that I'll be making.

Cheers!

Bainy

 

[snsdmonkey]

Here's my first chart:



Date: 06/02/2014

Position: Long (25% of capital)

Price: $35.72

Stop: $34.95
Just below the support and to avoid market noise (still not great at judging where stops should be).

Target: $38.00
Target is top of the trading range.

Comments: I've draw in an uptrend channel, bought on a green Force Index and turning of the MACD. I am not quite sure the bottom support is drawn correctly though, could it be moved up a bit or is this one fine?

 

[darkhorse70]

Hey dude. Im a noobie too, so Ill just say how id tackle this. First off you'r risking 80c for a potential $2.50 gain. Maybe you want to increase the potential upside to a ratio of 1:5. Anyway as far as the price range is concerned id use something like volume to confirm if the range is being respected. So for example if it gets close to support and it bounces away quickly with high volume and closes on the upper side of the bar ill take it as a good sign. As far as macd goes and other indicators im not a fan in my short time of learning about trading. Im sure they work but I rekon using simple tools like volume are all you need as well as proce action. Hope it helps

 

[darkhorse70]

You will probably want to increases the chances of the nove by abalysing the bigger picture of the market. The main indexes etc.You wouldnt want to go long if the major indexes are close to an important resistance till maybe after they over come them

 

[skc]

Comments:[/B] I've draw in an uptrend channel, bought on a green Force Index and turning of the MACD. I am not quite sure the bottom support is drawn correctly though, could it be moved up a bit or is this one fine?

BHP reporting on 18 Feb. What's the plan there?

 

[Valued]

It looks like you have used your view of the market to shape your trend lines. They have no value this way. They are biased lines. Trend lines must shape your view rather than the other way around.

 

[snsdmonkey]

BHP reporting on 18 Feb. What's the plan there?

You know you have me stumped there because I usually just buy the rumour and sell the fact with the smaller stocks. Depending on what the SP is, I will have moved my stop upwards. I guess it's sell on any change in sentiment, if not continue to hold until the chart says otherwise.

It looks like you have used your view of the market to shape your trend lines. They have no value this way. They are biased lines. Trend lines must shape your view rather than the other way around.

Could you explain what you mean by this, I don't quite understand what you mean

 

[burglar]

Could you explain what you mean by this, I don't quite understand what you mean

I'm no expert ...
You are showing trendlines as a channel with a distinct uptrend.
If you pick points nearer the Share Price Action, you may find the channel is going sideways.

If indeed it is a channel and it is going sideways, it may still be a good trade.

As for a stoploss ... if you don't give it enough room, you will learn stopping out.
Alternatively if you were to give it too much room, you will experience pain.
But then, I expect you already knew that.

Can you afford to lose as much as 8% of your capital?
Your call, ... and none of my business.

Good luck with your first trade!

 

[snsdmonkey]

I'm no expert ...
You are showing trendlines as a channel with a distinct uptrend.
If you pick points nearer the Share Price Action, you may find the channel is going sideways.

Thanks for point that out, that was the exact issue I was having with these trendlines. That would make the recent BHP action just a correction, and my entry point not that great.

Can you afford to lose as much as 8% of your capital?
Your call, ... and none of my business.

Good luck with your first trade!

The trade only risks about 0.5% of my capital?

 

[Trembling Hand]

It looks like you have used your view of the market to shape your trend lines. They have no value this way. They are biased lines. Trend lines must shape your view rather than the other way around.

What is wrong with his trend lines. Its showing a channel and that is what he is trading. Are you saying because its not a perfect line where the stock turned on a dime at the straight trend line its invalidated as a channel?

 

[satanoperca]

What is wrong with his trend lines. Its showing a channel and that is what he is trading. Are you saying because its not a perfect line where the stock turned on a dime at the straight trend line its invalidated as a channel?

Nothing, just the same in manufacturing specification, everything has a variance/tolerance +/- X.

I found channels to be far more consistent if they fell within a range than waiting for perfect alignment, after all it is human behavior you are analyzing.

Cheers

 

[burglar]

Thanks for point that out, that was the exact issue I was having with these trendlines. That would make the recent BHP action just a correction, and my entry point not that great ...

I could be wrong!

... The trade only risks about 0.5% of my capital?

I read somewhere that 8% is a sweetspot.
I trust that source.

I don't expect you would or should trust me.

Yes, I was aware that your risk was way small.
You must do your own research,
dovetail what you learn with what you already know.

It's part of the fun! :

 

[Valued]

What is wrong with his trend lines. Its showing a channel and that is what he is trading. Are you saying because its not a perfect line where the stock turned on a dime at the straight trend line its invalidated as a channel?

Well I look at it like this. It's the same chart but my trend lines are parallel. His must not be. As you can see, the stock is making lower highs but higher lows. The stock has also passed through the trend channel.

It's a completely different view of the same situation and all I did was zoomed out a bit and drew it from the low of the bar before the hammer he drew his from and did a parallel line at the top. It looks like my data (EOD yahoo on Amibroker) is presented very differently to his too. It's like it's on a different scale. I have prorealtime for free through IG Markets. I can't match the same trendlines as he did on Amibroker but I can on prorealtime. I double checked the data and it's the same. My amibroker is using automatic linear scaling (the scale it uses out of the box).



For reference, the green line is just the 200 SMA.

 

[burglar]

... Target: $38.00 ...

Some RANDOM thoughts:

Is this an open trade?
How fixed is your target?

i.e. Are you meaning to run your profits?

Have you checked any fundamentals for this company?
It is BHP
When are they paying a dividend?

Is it tracking the AllOrds or vice versa?

It is double listed. Is that the cause of excessive gapping?
Seems that the gap is sometimes bigger than your stop-loss.

What kind of stop are you using,
will it trigger and execute if SP gaps down overnight.

As I said, some random thoughts.

 

[Lone Wolf]

Well I look at it like this. It's the same chart but my trend lines are parallel. His must not be. As you can see, the stock is making lower highs but higher lows. The stock has also passed through the trend channel.

It's a completely different view of the same situation and all I did was zoomed out a bit and drew it from the low of the bar before the hammer he drew his from and did a parallel line at the top. It looks like my data (EOD yahoo on Amibroker) is presented very differently to his too. It's like it's on a different scale. I have prorealtime for free through IG Markets. I can't match the same trendlines as he did on Amibroker but I can on prorealtime. I double checked the data and it's the same. My amibroker is using automatic linear scaling (the scale it uses out of the box).

Just for reference, attached is amibroker using Norgate premiumdata. I can draw the lines as the OP did. But I made them parallel since you mentioned it. Green line is the 200 SMA on close, not quite the same as yours.

I won't comment on whether the trend lines are correct. Everyone has a different view of the market, the real question is what are you going to do about it?

 

[Valued]

Burglar 8% capital risk per trade is absurdly high considering most people only have 50% or lower win rates. If that's the case, ever see a roulette wheel go black 13 times in a row? It will happen. Risk of ruin would be unacceptable.

 

[Trembling Hand]

Burglar 8% capital risk per trade is absurdly high considering most people only have 50% or lower win rates. If that's the case, ever see a roulette wheel go black 13 times in a row? It will happen. Risk of ruin would be unacceptable.

He means 8% share price move not capital.

On your chart being 'better' than the OP thats just nonsense. TA, especially, all the tradition patterns and rules mean nothing. Most who do manage to make money looking at EOD charts make it from bull markets and money management. Seems like a setup with a good R:R is as good as any other. I'd love to see someone writing some rules to prove their lines 'work'.

 

[cynic]

Burglar 8% capital risk per trade is absurdly high considering most people only have 50% or lower win rates. If that's the case, ever see a roulette wheel go black 13 times in a row? It will happen. Risk of ruin would be unacceptable.

After 13 unsuccessful trades at 8% capital risked per trade, the trader should still have approximately 1/3 of his/her starting capital!

 

[burglar]

Burglar 8% capital risk per trade is absurdly high considering most people only have 50% or lower win rates. If that's the case, ever see a roulette wheel go black 13 times in a row? It will happen. Risk of ruin would be unacceptable.

I know that 8% per trade is high, I also know 0.5% is low.
I think you are talking risk to total capital,
because I make $0.77 in $35.72 to be 2.1%

As I said, I am no expert.

Question is, do you want to learn about stopping out often or learn about losing big money.

 

[burglar]

... learn about stopping out often or learn about losing big money.

I've learnt both, but not in the same era!

Now I'm ready to rock'n'roll.

P.S. Found a thread relevant to the topic:

https://www.aussiestockforums.com/forums/showthread.php?t=26492