Improving Chart Analysis

[barney]

MichaelD,


So at $100,000 total capital 2% is $2000.
10 losses at 2% = $20,000. You can see why I don`t like the arbitrary percentage determining how much I will risk.

I prefer something more like 0.5% or less = I don`t know but it is way less than 2%.


Nizar

Your stop determines your tradable risk, so the above is fallacious unless employing a percentage stop of say 2% as your tradable risk. (look above)

I want at least 3 to 1 reward to risk with not more than $300 loss per trade (yes this is arbitrary) sometimes $500. At, say $100,000 that is 0.3%; 10 losses = $3000, I still have plenty to recoup the losses with and IF getting some wins at, at least 3x, maintaining or improving the expectancy curve - the goal!

The only offset with this is sometimes my initial purchase is small until breakeven and then pyramided with more funds as it goes higher increasing brokerage. But you can`t have your cake and eat it too, as the saying goes.

Hi Snake, was wondering when you'd "bounce" back in. Thats the most I think you've ever written in one post (JK) .... Interesting comments as always.

Can I as a newbie make this comment/observation with regard to stops (in my position) ............. a) I have limited capital atm, so my primary concern due to that restriction, is, when I enter a trade, I always consider the "daily trend" for that stock ...... ie. If the general trend/say weekly or monthly, is up, then I wait for a day when the daily trend fits my "assumptions" (or whatever I should call it), After I place my trade, I place a very (very) tight stop/loss, because I believe the stock should continue to do what it "seems" to be doing....... If I get it right and the stock goes my way, then I can almost immediately move the stop loss to break even position (which for me is like utopia!! If I get it wrong and the stock goes against me, I am now, (after much tutoring from those wiser than me on this Forum.... thank you all) Happy to be stopped out at a minimal loss of way less than 2% (Usually only a couple of cents on an average stock price of say $3-4) ........... As I say, my position is probably a little different to most ( I have to be extremely careful with the capital I have left ............. I simply cannot afford to "stuff up" any more) ................ but my point is .....that this "careful" approach seems to be working for me at this point, so I'm gona stick with it ............ Any opinions welcome .................... Barney.

 

[It's Snake Pliskin]

$100k at say 20k position size, $300 is not that much. It wouldn'ty allow for the average movement of the stock. A stock may move this much and STILL be in an uptrend. The whole point of a stop is to get you out of there when the trend changes, isnt it? For example if you bought PDN at $5, thats 4,000shares. $300 stop would be set at $4.925. or 1.5%. This would almost definately get hit. But i guess 2% is a bit loose.

Point taken.

Snake do u use trailing stop losses and when?

Nizar you are missing the point.
Initial stops and trade entry: most of the time I don`t directly know my position size in $$$. Only the size of the position. I do know my tradable risk though which is $300 - $500 usually.

As I generally have the luxury to sit at a computer (though I have a life and don`t just stare at the screen in anticipation) I tend to use discretionary stops when I feel it has been exhausted. I can always get back in if it proves me wrong - using MA's lose too much money and tend to push one into a right and wrong mentality which I don't care for.

Snake

 

[barney]

Hello barney,


Re Post 290:

In periods of high volatility when events like takeovers or significant bad news are in play, there is considerably more uncertainty involved (although smart people like Soros and Buffet can sometimes take advantage of this of course n their respective ways – but this is another discussion outside of chart analysis entirely – look at Soros’ theory of “Reflexivity” for instance).

In essence with moves like PMN currently (this is not financial advice for this particular stock, but a general observation about the pattern and takeover events generally) I perceive as highly dangerous to trade once a situation like this is known in the public. Unless you have specific information that is not widely known (and even if you possess this, markets can still do erratic things contrary to what you’d expect), it is really a coin toss as to what may transpire from the chart image you have posted.

Where do you think the price might go? In high momentum vertical moves, going long or short in the middle of such spikes could see great gains or losses. There are some traders who specialise in this. If you were long in this case, you could have taken profits on the gap up day (I certainly would have – I may even have exited the whole position).

The problem is that if you can’t assess the situation and have exit rules in place, these moves are very hard to trade effectively consistently. If you have traded these for years and know what you are doing, fine. But for newbies, this kind of move can be a real trap.

What would I do here? I fully agree with Michael here. Personally I’d stay well clear of it. I need a reason to enter, and I have a process for constructing a trade.

The question you need to ask yourself barney is wether you feel technically proficient enough to construct a consistently successful approach to this kind of volatile move or not. If not, you need to study these moves more if you want to trade them. You may also later come to the same conclusion that Michael and I have – these moves once in play are high risk trades, and hence should be avoided (That doesn’t mean you can’t enter earlier and be in them when they happen – preferably on the right side of the market).

Of course you may have a gift for reading these situations and become a master trader in playing the odds here. Fine if you can do figure out a way to do this consistently. There are traders out there that play these moves, and you may be one of them. Me, I have tried and won and lost heavily trying to do this in the past.

Now, I look for specific situations to trade, and more importantly, recognise specific situations NOT to trade. This is one of them.

Food for thought.


Regards


Magdoran

Hi Mag, Thanks for your analysis. I agree with your comments (as always). I must confess here, that I shorted this stock midway through Friday (PS I would not short it now because the initial drop may be over)......... Now my reasoning was this ........ There appeared an apparent rejection (or maybe just profit taking) of the initial spike on SP. (And this was on an up day for the ASX, which kind of "sold" it to me) I have seen so many stocks do this "big" spike only to fall dramatically over the next 24-48 hours ............. And I speak from "financial" experience because I have in the past bought many of these kind of stock positions on the up, only to be crucified on the almost immediate plunge back down, so I " short sold" the stock, but as I stated in my previous post re stop losses, I took a very tight stop/loss position just in case it went sour ............... Now in this case I got lucky (for want of a better word), and the SP dropped a lot before close............. My position now is ; I have reset my stop/loss to a "profitable" position, so in this instance all is well (praise the Lord!!) I expect this stock to probably rise again (maybe subtantially), but my position is "safe" ............. I would not consider "shorting" this stock at this point in time (which is what you are saying) due to the "unknowns", but I considered "shorting" it when I did to be an educated risk at that point in time ............ Maybe I'm playing outside my league, but I seem to be better at this kind of position than some of the more "obvious" positions (Probably because I've been on the losing side of so many of these kinds of trades) Thanks, Barney.

 

[wavepicker]

"Before You Recoil In Horror" (Some Practical Advice From Bob Prechter)
By Anna Troupe

An analyst in a recent news story says using stops is the "most basic tactic" for managing risk in a volatile market. The advantages (according to this analyst) are that they define losses in advance, they give you an objective reason to sell (exit) your position, and get you out before getting emotionally involved. So by using stops, investors will "spare themselves the kinds of losses that are difficult to recover from."
Sounds logical, right? As it turns out, Bob Prechter has a very different take on risk management and on using stops. For anyone who trades or is considering doing so, here's a "second opinion" -- an insight crafted from years of experience that can improve your understanding of trading in general.
Number one on his list of six requirements for successful trading (page 99 of Prechter's Perspective, c.1996) is "A method: Any time you enter or exit a market, it must be for a predetermined reason that will also apply in the future." Number five says, "Accommodation of losses: The perfect trading system does not exist, so your method must deal with taking losses."
The first step to "dealing" with losses is to manage risk in advance. As Bob warns in Prechter's Perspective, "If you take a position large enough to inflict serious financial damage upon yourself, you are a loser going out of the gate."
Back to requirement number one -- a method for entering and exiting the market: In the March Elliott Wave Theorist, Bob comments that every (trading) book says to use stops. Yet he states unequivocally his belief that "people lose more money on stops than anything else."
"Before you recoil in horror, consider that I know a futures trader who steadily makes $200,000 - $400,000 every year, and he never uses stops.
So what should a trader use in place of stops? He should use real-time analysis. The question isn't so much whether a level is broken but what the analysis indicates as it breaks. A stop only takes one aspect of analysis into account: price. There is much more to analysis than price.
A stop also makes you lazy. If the market and your analysis turn against you, you are prone to think, 'well, if the market takes my stop, then I'm out.' But if you have already decided that your position is wrong, you should already be out! On the flip side, when you already have a stop in and decide it's in the wrong place, there is a psychological impediment to widening it. If you don't act, the stop is typically taken out, and then the market turns your way without you.
To those who insist that without stops they'd get killed, I say, you are trading with too much leverage. Leverage forces you out so often that all you will have after years of trading is a long string of losses from stop-outs. Trade well within your capital so that you can allow the market time to respond to the forces that you detect developing in your analysis. If you cannot watch the market closely or do not have time to do the analysis (or don't have someone doing it for you), you shouldn't be trading in the first place. Aside from all that, there may in fact be occasional times for close stops. But treat them as exceptions that analysis demands."

 

[Magdoran]

Learning too many indicators, taking Elliot Wave to it's extremes, does this make you more profitable ? . Does having 30 projection lines on a chart give a better probability of likely price action than just taking the trend, price and associated volume, using support / resistance levels with good money management rules.Probably not.In fact it can make you confused, too many conflicting signals can freeze you out, stop you being able to place a trade.

What actually is taking Elliott to extremes? Didn't know such a thing was possible. You just follow the rules. Simple. A move will either work out or becomes invalid.

Does it make someone more profitable? Who knows?. But it might give you a hell of an edge if used in the right hands. If you really would like to have your question answered Porper, then perhaps you should pit your skills against someone who uses one of these systems. Then you would find out huh?What actually is taking Elliott to extremes? Didn't know such a thing was possible. You just follow the rules. Simple. A move will either work out or becomes invalid.

Does it make someone more profitable? Who knows?. But it might give you a hell of an edge if used in the right hands. If you really would like to have your question answered Porper, then perhaps you should pit your skills against someone who uses one of these systems. Then you would find out huh?

I tend to agree with machi, this is the hardest game in town. I agree with the notion that the right approach in the right hands can certainly improve a trader’s edge, especially when the focus of this thread is on pure chart analysis.

While I agree with Porper’s notion that too many indicators, or too much complexity which is not aiding the trader to be consistently profitable, is to be avoided; I would make a distinction that there are other variables to consider such as the technical analysis proficiency, experience, and approach (style, time frame etc).

Different styles of analysis require disproportionate levels of effort. For example, it is fairly easy to set up a simple moving average cross over, and enter and exit based on generated moving average cross over signals. To add complexity to this, add in a basic back testing system. Then add in an oscillator. Already the effort required increases.

Let’s consider various levels of Elliott Wave analysis in comparison. I know people like wavepicker for example have spent over a decade working on this approach. Also, consider that every person who reads this thread has a unique make up – both mentally and psychologically. So another variable is the person involved, and their make up – strengths and weaknesses. Add to this their determination and ability to learn and adapt, and their will power to do this.

So the question is, will one approach or another make you profitable? This really depends on a range of variables, doesn’t it? The person, the approach, and most importantly - the market.

This is where I again agree with machi’s points about the prevailing market conditions, and that there is a choice for example to trade the short side if the individual chooses to do so, and if they do, that there are issues to consider to trade profitably consistently if doing so. Alternatively as Daffy (tech) points out, you may opt not to trade short. In my view, horses for courses. So, counter trend trading is one valid way to make good returns even in a raging bull market if you are proficient at doing it.

I agree with swingstar’s points in post 301:

As for the argument of “complexity vs simplicity”, ironically I think this is a gross over simplification of what is actually a very involved subject. I kind of object to people glossing over the labyrinth of theories and practice in the market with this throw away line about “simplicity”. Let’s tease this out, and start being specific, rather than chant this sloppy mantra about lionising the “simplicity” (misnomer) over equally incorrect labelling of “complexity”.

Hard Facts:

There is a diversity of approaches, and every person reading this thread is unique. Some people are just not cut out to use many of the methods outlined on this thread. Many will fail and give up. Some will have middling results as they develop. Some will do really well out of the market, and make consistent returns.

Yes we want to be profitable. Yes we want to develop an overall strategy (which may involve one or more approaches) which consistently returns a profit.

The challenge is to be able to narrow down the information deluge we are confronted with into a format we can use to make market decisions. This can be based on a vast array of methods (too many to go into here).

The point I would like to make is that the strategy needs to suit the individual involved, and that the level of research and development is in part a function of the capacity of the individual, and in part the level of commitment of the individual in terms of time and effort, and the ability to be effective.

Yes we want to boil down the complexity into components that we can deal with, but this might actually be an involved process. There is a chasm of difference in effort and knowledge required if your objective is to build a passenger jet as opposed to flying a kite. They both fly, but the dynamics are vastly different.

So, just as wavepicker said in post 304, learning to read the instrument panel was necessary to fly the plane. If you want to fly a plane, you need to learn how to do this. If you only want to fly a kite then you don’t. What I’m trying to do is to talk about some specific areas of the instrument panel. I hope that this is of some interest to some of the readers who want to know more about the finer points.

Above all this, I think nizar is onto something by recognising the importance of psychology. It is over 50% of the game in my view. But this is not the psychology thread; it is the “improving chart analysis” thread, which is what I’ve focussed on. Full commendation to barney for keeping the thread on the subject which is to discuss different ways of interpreting charts.


Regards


Magdoran

 

[wavepicker]

Hello barney,


Re Post 290:

In periods of high volatility when events like takeovers or significant bad news are in play, there is considerably more uncertainty involved (although smart people like Soros and Buffet can sometimes take advantage of this of course n their respective ways – but this is another discussion outside of chart analysis entirely – look at Soros’ theory of “Reflexivity” for instance).

In essence with moves like PMN currently (this is not financial advice for this particular stock, but a general observation about the pattern and takeover events generally) I perceive as highly dangerous to trade once a situation like this is known in the public. Unless you have specific information that is not widely known (and even if you possess this, markets can still do erratic things contrary to what you’d expect), it is really a coin toss as to what may transpire from the chart image you have posted.

Where do you think the price might go? In high momentum vertical moves, going long or short in the middle of such spikes could see great gains or losses. There are some traders who specialise in this. If you were long in this case, you could have taken profits on the gap up day (I certainly would have – I may even have exited the whole position).

The problem is that if you can’t assess the situation and have exit rules in place, these moves are very hard to trade effectively consistently. If you have traded these for years and know what you are doing, fine. But for newbies, this kind of move can be a real trap.

What would I do here? I fully agree with Michael here. Personally I’d stay well clear of it. I need a reason to enter, and I have a process for constructing a trade.

The question you need to ask yourself barney is wether you feel technically proficient enough to construct a consistently successful approach to this kind of volatile move or not. If not, you need to study these moves more if you want to trade them. You may also later come to the same conclusion that Michael and I have – these moves once in play are high risk trades, and hence should be avoided (That doesn’t mean you can’t enter earlier and be in them when they happen – preferably on the right side of the market).

Of course you may have a gift for reading these situations and become a master trader in playing the odds here. Fine if you can do figure out a way to do this consistently. There are traders out there that play these moves, and you may be one of them. Me, I have tried and won and lost heavily trying to do this in the past.

Now, I look for specific situations to trade, and more importantly, recognise specific situations NOT to trade. This is one of them.

Food for thought.


Regards


Magdoran

Hi Mag, with regard to the Mclaren faker move. He calls it 'trading against the spike'. Usually the day following the spike is an inside day. The direction of the day following the inside day is the one that is usually bogus, and the market may do the opposite of that day, if it is a down day then prices will usually go back up and re test the old highs, so he says.

Cheers

 

[Porper]

hi,

I think the point he is trying to make is that you have to place a stop in a strategic position. I mean I know traders that place an arbitrary stop and then they get stopped out. Repeatedly. A stop must not be placed in an obvious position. Most likely if you have placed your stop in an obvious position, then so has everyone else. All you end up with in the end is a string of stopouts.

I totally agree, a stop cannot be placed in an obvious place, and this is how the text books would have us do it, ie. 1 tick under a support line.

This of course effects our risk/reward as we tend to place a stop further away trying to avoid being "played" by the big boys.It's amazing how many times prices will just go under a support line then bounce back on heavy volume.

If this scenario does happen, which of course it doesn't because it is illegal ....................... so wont go there.

 

[It's Snake Pliskin]

A stop also makes you lazy. If the market and your analysis turn against you, you are prone to think, 'well, if the market takes my stop, then I'm out.'

No the lazy are lazy. It is insurance only not a SPOON! Open wide, that's a good boy.

 

[Magdoran]

Hi Mag, with regard to the Mclaren faker move. He calls it 'trading against the spike'. Usually the day following the spike is an inside day. The direction of the day following the inside day is the one that is usually bogus, and the market may do the opposite of that day, if it is a down day then prices will usually go back up and re test the old highs, so he says.

Cheers

Hi Wavepicker,

Absolutely. The idea is that the faker move is indicating the wrong direction. Yes, it is usually an inside day. Which is why I read this chart as being ambiguous.

Thanks for clarifying this, my comments could have been clearer.


Regards



Magdoran

 

[Magdoran]

Positioning of stops is the hardest thing you can do in trading.

Why is it ?

It is very simple.Place an initial stop at entry.Then a breakeven stop (if this is how you trade) anyway there are several types of stops, too many to go into, you get the drift.But all have very exact specific rules.There is nothing difficult about it at all Machi.I am a beginner and if I can do it so can anybody.

Actually I think that there is a real art to placing your stop, and it is deceptively simple.

It is easy to mark any old price or time on a chart, but to integrate setting stop losses into a trade to maximise profitability I would argue takes a lot of experience.

It is in effect much more involved than many people think. I have built a series of exit criteria into my stops for instance, such as time as a factor, technical, discretionary failure and other reasons.

This is a real trap for beginners if they think this is easy full stop. The basic concept is easy; the application in the real market to make real time market decisions is quite another story.


Regards


Magdoran

 

[barney]

Hi Wavepicker,

Absolutely. The idea is that the faker move is indicating the wrong direction. Yes, it is usually an inside day. Which is why I read this chart as being ambiguous.

Thanks for clarifying this, my comments could have been clearer.


Regards



Magdoran

Thanks Wave and Mag, Even though I didn't know what to call what I was seeing (Inside day) ............. Would it be fair to say that this "common" feature of price spikes (reversing substantially during 24-48 hours) in a sense
is a "trading" opportunity ( be it very SHORT TERM!! of course, which is how I was looking at PMN )? Thanks guys, enjoying the education .......... Barney.

 

[Magdoran]

Originally Posted by machi
In my opinion totally incorrect. Some of the best investors in the world i.e. Buffet, Templeton to name a few have made it big time, buying low and selling high.

Obviously you have no other mechanism for buying a stock other than the fact that it is making new highs. How do you know it's not just a rally in a bear market? Simple you don't. Buying on breakouts to new highs is a poor strategy in my opinion. A breakout to new highs can lead to a false move. False moves can lead to fast moves in the opposite direction

I wouldnt say totally incorrect.

Its as valid a stratagy as buying a pullback.
Simply when you buy a pullback even if you use fib or Elliot or Gann or whatever as analysis you wont know before time if the pullback will hold or keep going---just as you wont know for a high to continue higher.

By the way Buffet made his money buying a run down company at a bargain and turning it into a winner. He owned the company---big difference!!!

As for saying its a poor strategy,I would love to see evidence to support a comparison of the 2. hypothesis and rhetoric dont qualify in my veiw as supporting evidence.

I tend to think that there are a range of times you can enter a position ranging from guessing where a pull back might end before you have confirmation, on a confirmation criteria is met with a pull back, anywhere along this trend including just at or above the high.

Any of these points can be traded successfully based on the individuals market view. I have some specific patterns I look for in the chart.

I would agree though that entering around a previous high (or low if looking to go short) has some risk because the underlying is nearing previous resistance (or support).

If Michael finds he is effective doing it this way fine. Me, I do trade near new highs sometimes based on the pattern (have done recently), but fully aware that there is quite some risk of a marginal high occurring, and being prepared to exit or even reverse the position.


Regards


Magdoran

 

[It's Snake Pliskin]

Hi Snake, was wondering when you'd "bounce" back in. Thats the most I think you've ever written in one post (JK) .... Interesting comments as always.

Can I as a newbie make this comment/observation with regard to stops (in my position) ............. a) I have limited capital atm, so my primary concern due to that restriction, is, when I enter a trade, I always consider the "daily trend" for that stock ...... ie. If the general trend/say weekly or monthly, is up, then I wait for a day when the daily trend fits my "assumptions" (or whatever I should call it), After I place my trade, I place a very (very) tight stop/loss, because I believe the stock should continue to do what it "seems" to be doing....... If I get it right and the stock goes my way, then I can almost immediately move the stop loss to break even position (which for me is like utopia!! If I get it wrong and the stock goes against me, I am now, (after much tutoring from those wiser than me on this Forum.... thank you all) Happy to be stopped out at a minimal loss of way less than 2% (Usually only a couple of cents on an average stock price of say $3-4) ........... As I say, my position is probably a little different to most ( I have to be extremely careful with the capital I have left ............. I simply cannot afford to "stuff up" any more) ................ but my point is .....that this "careful" approach seems to be working for me at this point, so I'm gona stick with it ............ Any opinions welcome .................... Barney.

Barney I can't give advice.

Consider this:

Momentum trading strategy
Range trading strategy
Countertrend trading strategy
What strategy are you using? Shouldn't you determine this first?

Determine what is acceptable for a loss.

Protect capital.

Continue to protect capital.

Let winners run and protect your increased capital.

A tight stop is not always the way to have a small loss - please think about it.

Snake

 

[Magdoran]

Thanks Wave and Mag, Even though I didn't know what to call what I was seeing (Inside day) ............. Would it be fair to say that this "common" feature of price spikes (reversing substantially during 24-48 hours) in a sense
is a "trading" opportunity ( be it very SHORT TERM!! of course, which is how I was looking at PMN )? Thanks guys, enjoying the education .......... Barney.

Every move in the market is a potential opportunity to do something.

The question is can you consistently make profits with this kind of move?

Me, I tend to think these are too hard. I don’t like the risk to reward parameters, and I can’t formulate an effective strategy or assess the probabilities well enough. Too much to work out in too little time with too much emotion and pressure.

I tend to like to make decisions coolly; hence I shy away from these kinds of moves once they’ve started. If I’m in something when it happens, I quickly appraise the situation and make a call if I have to. Otherwise I leave it well alone. I aim to trade what I understand.

But that’s my personal preference. You on the other hand may have a gift for trading these. It is possible. In most cases though most people don’t make good calls under pressure. Trading these for real and not paper trading them is different too.

I don’t really know anyone that specialises in this style in my circles, but I have heard of some people being masters at this kind of event, but I believe they were highly experienced players.

Of course there are institutional players that do this stuff all the time, and certainly the market makers have a heavy selection on people who can make major decisions quickly.

Maybe you are one of these rare people. If you think so, why not try out with a market maker with their test and see? If you are offered a role at a place like that, then maybe you have what it takes.


Regards


Magdoran

 

[wavepicker]

I totally agree, a stop cannot be placed in an obvious place, and this is how the text books would have us do it, ie. 1 tick under a support line.

This of course effects our risk/reward as we tend to place a stop further away trying to avoid being "played" by the big boys.It's amazing how many times prices will just go under a support line then bounce back on heavy volume.

If this scenario does happen, which of course it doesn't because it is illegal ....................... so wont go there.

Porper,

You wouldn't beleive how many times I have had to let good trades go because I have been stopped out. This was especially the case when I first started to trade.

I mean you do all the hard work planning your trade, expected entries, exits, and other contingencies etc. What does the market do? It does some fancy footwork first, takes out out all the obvious stops, only to move in your desired direction of speculation shortly after!! Now that can really piss you off!! I am sure that has happened to most of us here at some stage or another.
There has to be careful consideration to where stops are placed. Sometimes I get the impression, dealers love us to place stops and even push and advertise it. It's in their interests, the more trades they can get people to do the better.

Cheers

 

[barney]

Barney I can't give advice.

Consider this:

Momentum trading strategy
Range trading strategy
Countertrend trading strategy
What strategy are you using? Shouldn't you determine this first?

Determine what is acceptable for a loss.

Protect capital.

Continue to protect capital.

Let winners run and protect your increased capital.

A tight stop is not always the way to have a small loss - please think about it.

Snake

Hi Snake, You've done it to me again!!! I've read through what you've written at least 6-8 times ................ And my conclusion is ........... (wait for it .......) I thought that what I had described as my current "attack" to entering (and hopefully continuing) on trades (mainly short term trades atm) was kind of on the same wavelength as what you have told me to consider ...... Re A tight stop is not always the way to have a small loss - please think about it. please fill me in a bit, cause I really thought I was on the right track PS I really enjoy decifering your comments cause there are many "pearls of wisdom" amongst so few words, but I might need a little help on that last part Thanks, Barney.

 

[tech/a]

Hopefully this will illustrate the entry question well.

This is a trade which is one which is public here on tech trader.

http://lightning.he.net/cgi-bin/suid/~reefcap/ultimatebb.cgi?ubb=get_topic;f=74;t=000029;p=3

 

[It's Snake Pliskin]

Hi Snake, You've done it to me again!!! I've read through what you've written at least 6-8 times ................ And my conclusion is ........... (wait for it .......) I thought that what I had described as my current "attack" to entering (and hopefully continuing) on trades (mainly short term trades atm) was kind of on the same wavelength as what you have told me to consider ...... Re A tight stop is not always the way to have a small loss - please think about it. please fill me in a bit, cause I really thought I was on the right track PS I really enjoy decifering your comments cause there are many "pearls of wisdom" amongst so few words, but I might need a little help on that last part Thanks, Barney.

Barney you are not lazy which is good.

The nature of the stock you intend to trade: daily ranges, noise, volume etc. They are all different and avoiding the manipulators taking your stops is important.
A small position with a wide stop can achieve a small loss if gone wrong. It doesn't have to be big positions, or small, with tight stops.

This part I liked:

If I get it right and the stock goes my way, then I can almost immediately move the stop loss to break even position (which for me is like utopia!! If I get it wrong and the stock goes against me, I am now, (after much tutoring from those wiser than me on this Forum.... thank you all) Happy to be stopped out at a minimal loss of way less than 2%

Snake

 

[It's Snake Pliskin]

Hopefully this will illustrate the entry question well.

This is a trade which is one which is public here on tech trader.

http://lightning.he.net/cgi-bin/suid/~reefcap/ultimatebb.cgi?ubb=get_topic;f=74;t=000029;p=3

Nice charts Tech!

They fail to acknowledge what trading strategies we are all using though. For trending - momentum - YES the exit as shown.

 

[barney]

Every move in the market is a potential opportunity to do something.

The question is can you consistently make profits with this kind of move?

Me, I tend to think these are too hard. I don’t like the risk to reward parameters, and I can’t formulate an effective strategy or assess the probabilities well enough. Too much to work out in too little time with too much emotion and pressure.

I tend to like to make decisions coolly; hence I shy away from these kinds of moves once they’ve started. If I’m in something when it happens, I quickly appraise the situation and make a call if I have to. Otherwise I leave it well alone. I aim to trade what I understand.

But that’s my personal preference. You on the other hand may have a gift for trading these. It is possible. In most cases though most people don’t make good calls under pressure. Trading these for real and not paper trading them is different too.

I don’t really know anyone that specialises in this style in my circles, but I have heard of some people being masters at this kind of event, but I believe they were highly experienced players.

Of course there are institutional players that do this stuff all the time, and certainly the market makers have a heavy selection on people who can make major decisions quickly.

Maybe you are one of these rare people. If you think so, why not try out with a market maker with their test and see? If you are offered a role at a place like that, then maybe you have what it takes.


Regards


Magdoran

Hey Mag, I appreciate I probably just "got lucky" with PMN dropping further on the day, but my main "learning" point was that I had my stop loss in place (and tight) so that my judgement, if incorrect, was covered. I don't know who "Market Maker" are, but I'd be pretty sure that my "personality" would not fit the "pressure" scenario. I like to make "valued" decisions as well ..... I think the fact that I had made so many wrong decisions in this familiar situation previously, perhaps gave me more confidence to "back" what I saw, if that makes sense.

You are again quite right to ask .... can you consistently make profits with this kind of move? ................ And that is why you and other "well educated" traders do well LONG TERM ............. and these are the things I need to keep "drumming" into my head .............. Anyone can have a short term "win", but to do it consistently over time requires a lot of dedication .............. Thank you again for the "subtle" wake up call, Barney.