Learning how to trade – an alternative to paper trading

[Julia]

I simply decide how much I'm prepared to pay for a stock and place a conditional order. If it doesn't fill today, then it probably will tomorrow, or if I really want it on the basis that it doesn't look at all like reversing, I might adjust the price.

Is this attitude peculiar to investors like me who are essentially buy and hold investors? Perhaps I'm missing something, but if you are looking to make a profit (aren't we all?) aren't you going to ensure you buy a stock when it's in a downturn in order to maximise your profit?

e.g. if CBA has traded in the range $38 - $41 in the last three months, wouldn't you place a conditional buy order for significantly less than $41 and simply wait for a day like we had last week when everything dropped substantially?

If you just decide to buy/sell at market open, surely you're leaving yourself open to all sorts of price variations?

If my logic is flawed I'm sure someone will point it out to me.

Julia

 

[It's Snake Pliskin]

If you just decide to buy/sell at market open, surely you're leaving yourself open to all sorts of price variations?

I agree!

 

[tech/a]

If you just decide to buy/sell at market open, surely you're leaving yourself open to all sorts of price variations?

Julia

If your trading in a short time frame then this could have an effect.
There are cases where if you exited at open after a signal the day before the price gaps up and the same for the buy side where the day before was a buy signal and open gaps down.Often you'll notice a levelling of good and not so good fills.
If your trading medium to long term small variations will have little bearing on the total trade.

 

[Milk Man]

Milkman,

Do you buy and sell in the first 30 minutes of the market - 10am onwards?

If so what is the rationale for that? (It's not flawed, I'm just curious)

I never buy in the first 30 minutes. 10.30 onwards if the opportunity is there. If not I wait for it. If it's not there I don't trade. (part of the plan)

Snake

I just use open for paper/backtests to be consistent. I dont trade as such yet so all ive ever done is ring the broker and tell them I want x dollars of abc. My logic might well be wrong because I dont buy/sell often enough yet to make any conclusions.

 

[Lyehopper]

I just use open for paper/backtests to be consistent. I dont trade as such yet so all ive ever done is ring the broker and tell them I want x dollars of abc. My logic might well be wrong because I dont buy/sell often enough yet to make any conclusions.

Milkman...DUDE! we gotta change that! and quick. Brokers are just blood sucking vampires man! :batman: You need to open an online account and start trading more actively. Paper trading is worthless IMO.... You gotta put the real bucks on the line. Feel that emotion, make those hard decisions ..... with real dollars to ever be a good stock trader.

If you want to trade the US markets I can help you.... So far.... I'm clueless about the Aussie market.... But I'm learning. It would be cool to be able to trade the OZ market in the evenings here if I want to. What time does your market open. How many stocks are listed? What's the time difference anyway? It's 5:00 pm here.... the markets closed an hour ago.

 

[Milk Man]

Its ok, when the trading starts ill be using online brokers and CFDs as well. I want to do forex but still learning about that. Its only been Buffet style stuff until now. Trading capital; coming soon to a market near you (tied up ATM). I could either buy 1 or 2 stocks right now or a portfolio that would get massacred by brokerage (even at $20 each way). I got some weaners to go soon so maybe then. Probably start with a mechanical system, then low risk discretionary on CFD (like Nick Radge), then forex and maybe commodities. You can buy my share in a dairy farm; then ill have heaps of capital .

 

[zuluwarrior08]

These are suggestions on how a person can learn how to trade.


An alternative to paper trading:

This requires an amount of at least $1000 - $2000.

THE NAME OF THE GAME IS TO STAY IN THE GAME (PROTECT YOUR CAPITAL!!!).

a) Invest in “Blue-chip” stocks less than $10 using the skills you have learnt in the last 12 months.

b) Invest $100.00 or so at a time (10 x $10, 12 x $8, 16 x $6, 20 x $5, 25 x $4
50 x $2).

c) Brokerage will kill you - $20 in and $20 out (total cost of buying and selling a share $40) but you will get in up to 20 trades.

d) This is the cost of your education and is cheaper than buying a system black box or attending a $4000 course.

e) You will feel the pain of losing real money but you will have gained some great knowledge about real trading.

f) Analyse where you went wrong or why you succeeded.

g) Ask for help if you don’t understand where you went wrong.


Good trading!

Dutchy without realising Ive stumbled across this thread and it is exactly what Im doing.

Started with $1000 using cmc markets CFDs, so that I can get exposure to a 10k portfolio fully leveraged. This has taught me to be extremely money management conscious as I dont have a lot of room if I get it wrong.

I spose Ive thrown myself in the deep end, but its really taught me that I need to take high probability trades, and if Im wrong, i need to get out quick and cut losses.

Ive been using a 5% max loss per trade, which really incorporates $10 to get in and $10 to get out. $20 commision+$30 movement in stock=5%

Ive found this site invaluable in my learning experience, so thanks for all your guys wisdom and experience.

heres to happy and fruitful trading in the future!!

 

[tech/a]

so that I can get exposure to a 10k portfolio fully leveraged

So your fully leveraged at 10:1

Ive been using a 5% max loss per trade,

At 5% thats 50% of initial capital.
If your saying $50 then you cant be using leverage.
Me no understand???

 

[zuluwarrior08]

Im risking 90-100% ($50) of my margin, so 5% of a $1000 position =$50

therefore really Im risking a max loss of $50 on a 1k position, but ive only put up $50 to get that position.

example buy 50 ANZ @ $29.00 = $1450 value, and ive put up a 3% margin ($43.50)
stop is set @ 28.40 for a max loss of $30 + $20comm.

See why I really have to look at taking high probability trades. It just means that my position sizes are smaller, as i like to put my stops in places below significant resistance.so my position size is determined by my stop placement.

I guess if i can protect this small amount of capital useing such high leverage, i must be getting ok at the game. once ive paid for my experience and felt the emotion of losing, and actually learning to remove emotion and forming a good system with a bit of experience behind me, i will be on my way.

Im happy to hear any suggestions from everyone, as every little bit helps.

 

[WTBD]

Hi Zulu

Purely my personal opinion and not to be interpreted as anything other than that.

You have the right idea but few comments below.

Just saw Dutchies thread re real time trading. Great thread/advice to novices and well worth using correctly to replicate actual sizes to be taken per your trading plan.

Paper trading also good if just starting out so long as you write notes and analyse why entry and pyramiding and exits and GSLO placing etc and back test methodologies/reasoning.

Back to Dutchies - Re actual small trades with provider suggest avoiding marketmakers and go to DMA with GSLO and be careful of stops being too close or you will be stopped out of the market and be aware of dividend payments due.

Game is to stay in the market with good risk mgmt and sound back tested methodologies that suit you as an individual so you need to be v honest with yourself and keep being honest to yourself- forget all the noise surrounding you.

For example If blue chip like ANZ it has v volatile moves daily as institution traded but trending bull for many years now weekly monthly. So then if you know share/cfd from research and history and charting and it is blue chip then chart its recent past lows and new highs and determine stop based on these and other indicators that suit you/your trading system both mechanical and above all use your trading plan to the letter but do modify both as required/experience teaches and then backtest again.

Above is N/A to daytraders as time-frame too long but if you are trader who is more short/medium in CFD's then follow the trend over a few days/weeks and run with your profits but use GSLO trailing stops. Cut your losses asap if trend against you on entries and reenter on either buy/sell signals or if trending and you r still unsure based on your indicators use small position for double entry and test the market. Your entry point is not as important as the way you enter. Adding to winners is more important and taking losses quickly and increasing winning positions and realising profits before tops if this is in your trading plan or whatever your plan tells you regarding profit taking.

Buying low and selling high is not the game since the market is continually changing but there will be a trend pattern which you must identify with individual stocks if not purely day trading. Buying on the way up and selling on the way down works better for risk mgmt and profit taking and capital preservation and growth.

Also try using exit signals as buy signals in reverse if you're not doing this already. Again start small and slowly add to your position as the price confirms the trend. There is no holy grail and no matter how complex some traders try to make entry and exit signals on their charts and mechanical trading systems - keep it as simple as possible. (No offence to the purely mechanical traders as this probably suits those who work in other professions and trade for a hobby)

Losing money in the markets is a given and can knock most out of the market before they can recover due to poor $ planning and mgmt skills and emotions but making those losses much lower than your profits taken is key to successful trader. If long term then you are really investor not trader although I see this argument on another tread some time ago and its rather a mute (egocentric) point as anyone in any business who is increasing their wealth and capital growth in any form over more than 1 yr consistently is in my opinion clearly successful for themselves unless money used/profits are less than the bank rate or managed fund return or interest debt due on mortgage or credit card etc or on another tack they may just be enjoying the journey and making a few dollars more along the way.

Great trading - "successful trading is experienced through hard work and long hours like any successful business - the difference is in the size of the takings, but the model remains the same".

 

[zuluwarrior08]

Thanks for the responses. I'll try and keep u up to date on what lessons I'm learning, and also I wont be surprised if I come here, describing a situation to you all and maybe help in deciphering a lesson out of it....It'd be good to see everyones opinions on what lessons can be learnt from certain situations

 

[Trembling Hand]

Started with $1000 using cmc markets CFDs, so that I can get exposure to a 10k portfolio fully leveraged. This has taught me to be extremely money management conscious as I dont have a lot of room if I get it wrong.

I spose Ive thrown myself in the deep end, but its really taught me that I need to take high probability trades, and if Im wrong, i need to get out quick and cut losses.

Ive been using a 5% max loss per trade, which really incorporates $10 to get in and $10 to get out. $20 commision+$30 movement in stock=5%

Ive found this site invaluable in my learning experience, so thanks for all your guys wisdom and experience.

heres to happy and fruitful trading in the future!!

zuluwarrior08
Without really knowing what you are doing I would guess that you may run into trouble with a bit of false logic on the max 5% loss per trade. If you have more than 1 position on your account is exposed to a high probability, if you are trading overnight, of taking a real nasty hit which could very easily take a 50% or greater loss in one day. 5 stocks gaping down 3% or more on CMC would hand half your capital to CMC in one day. Please be careful $1000 does not leave you much wiggle room

 

[>Apocalypto<]

There are 6 ways I know of to eradicate emotion in trading.

Individually or combined (depending on individual circumstance) emotion I believe can be totally eradicated from the equation.

(1) Dont trade if your under capitalised. If your nett worth is $5000 and you commit this or even 50% of it to trading you'll watch every tick and make emotive dumb decisions. If you have a nett worth of $500K and you trade $50k---its the equivelent of our undercapitilsed friend trading $500.Greed

(2) Dont trade excessive parcel sizes. If a move in one of your positions is enough to cause stress or an adverse move in your portfolio does the same chances are your trading to larger parcel sizes.Greed

(3) Understand Leverage and dont leverage beyond your means.10x CFD leverage means 10x potential loss.Greed

(4) Trade mechanically and understand what makes a trading method profitable.Understand its parameters and be sure your tested method stays within those tested.Fear

(5) Understand that standing aside from the market is in fact a position.Fear and Greed

(6) Profit is the greatest confidence booster and emotion leveller.Be quick to sell losers and slow to sell winners.Holding a portfolio of 10 stocks all 20 to 200% in profit eradicates the fear factor. Fear

I think every person new to trading should print that out and read it repeatedly

Tech that was so true it was as if I was reading a text book.

Great post.

Beginners take heed of everything in techs post.

 

[zuluwarrior08]

Ok so heres an update.
Over the last 3 months Ive been trading, Ive completed a total of 53 trades, with 3 current open positions. Thats an ave. of almost 1 per day.

Ive had 12 winners and 41 losers.
my ave winning trades were $83.75, and losing trades $49.37

total loss of $1019

This was paying a commision of $10 per entry and $10 per exit.
Total commision paid was $1060

As you can see, commision was a killer.
One of the biggest lessons I learnt was not trading my plan. as you can see the average loss was 49.37. this was due to gapping on the open past my stop and it not getting filled (maybe GSLO should have been used?) on a few trades, not moving stops appropriately when pyramiding positions.

The ave winning and losing trades included $20 commision per trade.

Ive pulled out the biggest winner, as this is the kind of thing I would like to aim for. Ill post a chart later this arvo. BHP, initial entry 90 @ ave.$32.99,exited @ $39.68

I was fully leveraged, usually paying a 3% margin (around $35) for a 1k position size.

Ave position size was 1k.

Ill use this forum as an analytical tool so stay tuned for coming analysis of my trades and how we can maybe benefit from them in the future. Any feedback is welcome. Cheers and good trading

 

[tech/a]

My feedback from the info given.

(1) Trading to often (to many trades),Hence too much costs
(2) With around a 25% win rate Id say your attempting to pick bottoms--stop trying to do that.
(3) Without knowing how you would have gone had you traded to plan--it is possible that your plan is flawed.--obviously the one you used (The one that wasnt the plan) certainly is.
(4) Not letting profits run.
(5) Over leveraged--you WILL blow up!

Other than that your Luckily still in the game!

Step back and consolidate ideas.

 

[zuluwarrior08]

Thanks TA

Heres the BHP trade which was executed perfectly IMO. if only all trades could run like this.

Entry was @ 1, with additions to position at 2 and 3. The signal to buy was the break/s of previous highs (grey) with stop placed at the blue line below support. exit was at 4- weakness at the large black with high volumes.

Any comments?

 

[Trembling Hand]

My feedback from the info given.

(1) Trading to often (to many trades),Hence too much costs
(2) With around a 25% win rate Id say your attempting to pick bottoms--stop trying to do that.
(3) Without knowing how you would have gone had you traded to plan--it is possible that your plan is flawed.--obviously the one you used (The one that wasnt the plan) certainly is.
(4) Not letting profits run.
(5) Over leveraged--you WILL blow up!

Other than that your Luckily still in the game!

Step back and consolidate ideas.

Yes TA, I agree a 25% win rate suggest that your trading plan (the good one as well as the one you actual did) has not got an edge on the other traders in the market. You need to try and eliminate some of the bigger errors, then see if you have a trading edge. Well done for keeping and analyzing your results so far and posting them.

 

[zuluwarrior08]

This is another trade that Id be aiming for repeatedly.

I missed the initial breakout at the green arrow, entered at the red. exit was at the second red arrow.

To clarify what Ive based the trade on in terms of tech A and fund A, ive used a ratio totalling 5 to determine why ive entered the trade and based on what ie I have a long position in shares at 0/5 tech/fundamentals- ie based purely on fundamentals. Both this trade and the BHP trade were based on a (50/50) 2.5/2.5 tech/fund ratio. most of my losing trades (20 out of 41) had a 2/3 tech/fund ratio.

7 trades taken were 4/1 tech/fund, with 5 being winners.

I think Im more succesful at technicals, plus its way more work doing the research for fundamentals. What does everyone think about this?
Keep in mind this is in the begginers thread so best comments will help all of us newbies. thanks for the feedback

 

[Trembling Hand]

Trading a stock with CFDs based on fundamental analysis is going to be tough. Short-term moves are not based on Fundamentals, the market moves on sentiment in the short term. 3% margin trading on fundamentals is crazy. 3% move in BHP can be one days move, the fundamentals have not changed in one day while you have lost all of your margin!!!!! There is nothing wrong with Fundamental analysis but you have no wriggle room with CFDs.

 

[theasxgorilla]

Perhaps I'm missing something, but if you are looking to make a profit (aren't we all?) aren't you going to ensure you buy a stock when it's in a downturn in order to maximise your profit?

This is a bit of a cheeky question...how do you determine a share is in a downturn? Do you look at a chart?