prawn_86
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Great stuff Peter, i am watching with interest
Pavilion103's LIVE ASX Momentum Setup Trading Thread
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G'day Peter,
1st of all many thanks for your time and effort in continuing Pav's thread, I'm sure he would be very happy with you picking up the reins and running with it.
I'm so looking forward to your take on this way of trading, the Trade Management from start to finish and also the Portfolio Management. You've covered a bit already so once again, thanks.
Can I get something out of the way early on?
Q: You say "when I'm bullish (XAO going up)" & "when I'm bearish (XAO going down)" What do you look for in the XAO, for you to come to this conclusion, especially when we are trading short term trades?
Cheers ... Debtfree
1st of all many thanks for your time and effort in continuing Pav's thread, I'm sure he would be very happy with you picking up the reins and running with it.
I'm so looking forward to your take on this way of trading, the Trade Management from start to finish and also the Portfolio Management. You've covered a bit already so once again, thanks.
Can I get something out of the way early on?
Q: You say "when I'm bullish (XAO going up)" & "when I'm bearish (XAO going down)" What do you look for in the XAO, for you to come to this conclusion, especially when we are trading short term trades?
Cheers ... Debtfree
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Debtfree: Good question and each trader will/should have their own definition. I look at the daily chart of the XAO regularly and draw lines that define whether the price is going up/down/unclear.
I define an up trend as a series of higher highs, and higher lows. A down trend is the reverse. There are times when price is between a higher high and a lower low. This to me is unclear and I might then look at the weekly chart for a bit of clarity.
I've noticed that my profits accumulate faster than the losses when the market is going up and so I try to start more trades at this time. I've also noticed that buying gold stocks is better when the price of gold is going up. I'll be buying oil stocks when the price of oil starts to rise. I prefer swimming with the tide rather than against it.
I have no doubts that it's easier for me to start trades when the market is going up, but does it really add to my edge? I keep detailed stats and record my description of the market condition when I start every trade. I also record the type of trade setup (break-out, pullback and reversal). I know my edge for each type of setup in every market condition. These stats show me that trading with the trend does improve my edge.
I'm not going to provide anymore details of these stats as they are personal and assist me to improve my overall edge. However it should indicate the level of commitment I've made in order to be consistently profitable.
Currently the trend is UP and if the XAO closes below 5700, I'll show some caution and reduce my open risk.
I define an up trend as a series of higher highs, and higher lows. A down trend is the reverse. There are times when price is between a higher high and a lower low. This to me is unclear and I might then look at the weekly chart for a bit of clarity.
I've noticed that my profits accumulate faster than the losses when the market is going up and so I try to start more trades at this time. I've also noticed that buying gold stocks is better when the price of gold is going up. I'll be buying oil stocks when the price of oil starts to rise. I prefer swimming with the tide rather than against it.
I have no doubts that it's easier for me to start trades when the market is going up, but does it really add to my edge? I keep detailed stats and record my description of the market condition when I start every trade. I also record the type of trade setup (break-out, pullback and reversal). I know my edge for each type of setup in every market condition. These stats show me that trading with the trend does improve my edge.
I'm not going to provide anymore details of these stats as they are personal and assist me to improve my overall edge. However it should indicate the level of commitment I've made in order to be consistently profitable.
Currently the trend is UP and if the XAO closes below 5700, I'll show some caution and reduce my open risk.
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That's it Peter, no more questions from me! 
You and your x-ray eyes looking through my screen at my spreadsheets and all along, you knew!
Not anywhere in my spreadsheets have I kept detailed stats of the overall market conditions when I've entered a trade let alone what type of trade setup it was. You're dead right, if I'm serious I should know these details and have them included in my spreadsheet to refer back to for feedback and as you say, to assist me in knowing my overall edge.
Thanks for the kick in the pants, graph and info ... very good indeed.
Cheers ... Debtfree
You and your x-ray eyes looking through my screen at my spreadsheets and all along, you knew! Not anywhere in my spreadsheets have I kept detailed stats of the overall market conditions when I've entered a trade let alone what type of trade setup it was. You're dead right, if I'm serious I should know these details and have them included in my spreadsheet to refer back to for feedback and as you say, to assist me in knowing my overall edge.
Thanks for the kick in the pants, graph and info ... very good indeed.
Cheers ... Debtfree
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#debtfree: nice one, of all the posters here I think you will get the most from this thread as you're prepared to ask questions and work at it.
Spreadsheet: I've added a target value. This will be a value that indicates a reasonable target for the trade. In most cases this will be a prior high, yearly high or a +2R target. These price targets will be considered in the market and if they get hit we sell. In some cases like API there wasn't any past resistance we may not have a target and take what the market gives us. Although we'll be vigilant near the big number levels (API = 1.50 level)
DE = discretionary exit, in this case to free up some capital and remove second trade in same stock code
PT = Sold at price target
TS = Sold after sell stop triggered
SL = Sold at initial stop loss
Thursday 15:30 update: No, don't expect these everyday.
API: Sold at our price target and this locks in a very good +4R result. This one win offsets five of our earlier losses. Nice one Pav, youv'e earned a drink on us.
PAN: Price is not going up and we don't need to hold two positions. I will sell the smaller trade at today closing price (I'll take the 0.54, now).
AGF: Thought about selling this fundie, but the last two days have been up and I'll wait a few more days. I know, we'll raise our sell stop to a close <1.14. That'll put pressure on it.
These sales give us some cash for one new trade (Trade risk = 1% = $500).
Time to start your scanners and find a few trading opportunities and we'll take the one that triggers first. That means we'll be placing pending orders just as Pav did.
Spreadsheet: I've added a target value. This will be a value that indicates a reasonable target for the trade. In most cases this will be a prior high, yearly high or a +2R target. These price targets will be considered in the market and if they get hit we sell. In some cases like API there wasn't any past resistance we may not have a target and take what the market gives us. Although we'll be vigilant near the big number levels (API = 1.50 level)
DE = discretionary exit, in this case to free up some capital and remove second trade in same stock code
PT = Sold at price target
TS = Sold after sell stop triggered
SL = Sold at initial stop loss
Thursday 15:30 update: No, don't expect these everyday.
API: Sold at our price target and this locks in a very good +4R result. This one win offsets five of our earlier losses. Nice one Pav, youv'e earned a drink on us.
PAN: Price is not going up and we don't need to hold two positions. I will sell the smaller trade at today closing price (I'll take the 0.54, now).
AGF: Thought about selling this fundie, but the last two days have been up and I'll wait a few more days. I know, we'll raise our sell stop to a close <1.14. That'll put pressure on it.
These sales give us some cash for one new trade (Trade risk = 1% = $500).
Time to start your scanners and find a few trading opportunities and we'll take the one that triggers first. That means we'll be placing pending orders just as Pav did.
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EOD update of sell exit triggers (TS) and target changes.
Remember: My exits are triggered by a close below the price level and we sell on the next day's open.
NO, we don't watch the open to see if we can get an extra tick or two. Only amateurs do that.
SEN: Raise TS to 0.085.
API: Raise TS to 1.14.
CAJ: Raise TS to 0.95.
These changes reduce our cap risk to 3.9%. We can start two new trades if there is enough cash.
I'll post the latest xls to show the results of our actions. I hope you'll see/feel that our cap risk is under control and why we are allowed to start two new trades. Grabbing the good profit from API offsets most of our losses from opening too many trades at once (IMHO). We've taken actions to allow our open trades to get better or get lost.
We see that we have to improve our W%, but we've only just started. This will improve as we trade stocks that are in strong demand and move higher for us.
OK - What type of setup do we want to trade? Obviously Pav's fav is the break-out from small consolidations. I like them also.
I also see that the index has had a small pullback in a clear up trend, so we can use similar setups in individual stock charts. I call these ambush setups. (A great example of this setup is in the chart of ALQ, but its not a sector I want to buy atm. Boggo - you will recognise this setup.)
Any questions?
Remember: My exits are triggered by a close below the price level and we sell on the next day's open.
NO, we don't watch the open to see if we can get an extra tick or two. Only amateurs do that.
SEN: Raise TS to 0.085.
API: Raise TS to 1.14.
CAJ: Raise TS to 0.95.
These changes reduce our cap risk to 3.9%. We can start two new trades if there is enough cash.
I'll post the latest xls to show the results of our actions. I hope you'll see/feel that our cap risk is under control and why we are allowed to start two new trades. Grabbing the good profit from API offsets most of our losses from opening too many trades at once (IMHO). We've taken actions to allow our open trades to get better or get lost.
We see that we have to improve our W%, but we've only just started. This will improve as we trade stocks that are in strong demand and move higher for us.
OK - What type of setup do we want to trade? Obviously Pav's fav is the break-out from small consolidations. I like them also.
I also see that the index has had a small pullback in a clear up trend, so we can use similar setups in individual stock charts. I call these ambush setups. (A great example of this setup is in the chart of ALQ, but its not a sector I want to buy atm. Boggo - you will recognise this setup.)
Any questions?
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Peter, this is great stuff you are presenting here. In some ways your approach to the market is similar to mine. What peaked my interest in particular is how similar your chart of the XAO with bullish and bearish ribbons (I have an additional 'neutral') is very very similar to my own. I also place a version of guppy multiple moving averages and a longer term moving average on my chart for a bit more clarity but that's a diversion to this discussion.
The use of the MACD when it moves into extreme areas and generates a 'sell' signal as it has just recently, is a fairly reliable guide to a market that has to be treated with caution as you note in your chart.
Please continue ...
The use of the MACD when it moves into extreme areas and generates a 'sell' signal as it has just recently, is a fairly reliable guide to a market that has to be treated with caution as you note in your chart.
Please continue ...
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Peter, another couple of question if I may:
How much volatility do you allow in your stop loss areas, such as a stop loss of no more than 20% of share price or, does it not matter for you? And at the same time is there a percentage in your stop loss area that is too close and you won't go under, such as 2%?
Also do you have a level in a share's price that you won't go over, such as $20 per share? I understand with a big bank you can get away with a higher level but I still thought $50K you might put restrictions on it, does it?
Are you chasing cheaper stocks for faster movement?
Cheers ... Debtfree
How much volatility do you allow in your stop loss areas, such as a stop loss of no more than 20% of share price or, does it not matter for you? And at the same time is there a percentage in your stop loss area that is too close and you won't go under, such as 2%?
Also do you have a level in a share's price that you won't go over, such as $20 per share? I understand with a big bank you can get away with a higher level but I still thought $50K you might put restrictions on it, does it?
Are you chasing cheaper stocks for faster movement?
Cheers ... Debtfree
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Gordon7 : Yes I thought of your thread as I posted this. Nice to see you respond to the lure. I like to stalk my trout.
MACD divergence - Ka ching! Well done. I was aware of this as Pav was starting all these trades.
My ribbon is based on the GMMA. Well spotted again.
Many of us are doing similar things with only small personal differences. No matter how we do it we all have to get the basic maths right in order to be profitable. If you see a potential TL break let us know and we'll trade it here.
Debtfree: I require more time for your reply.
Have a look at the volatility in the SEN, HSN charts. I like to apply a commonsense approach based on what I see in the charts.
MACD divergence - Ka ching! Well done. I was aware of this as Pav was starting all these trades.
My ribbon is based on the GMMA. Well spotted again.
Many of us are doing similar things with only small personal differences. No matter how we do it we all have to get the basic maths right in order to be profitable. If you see a potential TL break let us know and we'll trade it here.
Debtfree: I require more time for your reply.
Have a look at the volatility in the SEN, HSN charts. I like to apply a commonsense approach based on what I see in the charts.
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Well done with this Peter, be careful it doesn't burn you out. It can look relatively straightforward to a casual reader but there is a lot of work behind the scenes.
Regarding the index, I am a bit wary of it at the moment, potential for a further dip to mid 5600's but it is likely to trade sideways erratically for a while before it resumes it's uptrend through 6000.
Based on that you may not see the results for that you would have seen had you been at this point in the process a few months ago and we have had the end of reporting season and associated dividend payments.
ALQ was making the right moves but it has a lot of handicaps associated with that sector which is hindering what you are seeing as well. I was holding NCM warrants (NCMIOZ) but since selling those over a week ago I am out of that area of the market as you can see in the list below.
None of these below have been recent acquisitions and most have paid a nice dividend in the last month or so which together have given me a nice stop buffer.
These market downturns/corrections do provide some nice entries that you seem to be on to but timing and patience is the key at the moment imo.
Cheers
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Okay, some of my current potential trades in the near future but for different reasons include CCL (already in at $9.40), CGF, ERA, GNC, HSO, MFG, NHF. Most will fall by the wayside of course.
As Boggo says don't burn yourself out here.
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SEN looking great after today's action. Watch out tomorrow!
tech/a
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Don't know about tomorrow but I like the trade.
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Pure optimism tech/a, I'm expecting maybe a +0.11 finish.
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Thanks for the burn out warning. I felt that I needed to point out that trading is not all about the entries and the profit. There is a lot to be aware of and manage in between and hopefully I've done that.
I'll admin this EOD and I've allocated one hour each evening to reply and post updates. I'm scanning charts for my own trading requirements as well. This work is not wasted.
debtfree: Volatility is a study in itself. The best low risk entry is when volatility is low and we plan for a price rise with expanding volatility. A one size fits all % SL doesn't work. Don't ask me for the best trailing stop strategy. I don't know of it.
I prefer to trade the high priced stocks and I'm happy to get a $3.00 move in a $60 stock with a 0.60 iSL.
I'm certainly constrained by a 50K account, unless we use leverage. I'll give you an example from today.
eg I like the AHE chart and like the current sideways range. I thought about buying 4.25 with a iSL 4.10 ( 0.15 risk). The risk:reward is enticing, but should I trade that in this portfolio? See the pos size calculations.
Am I justified using 28% of the account in one trade? I think not even though the risk is only 1% account. Any company can report bad news and the share price suddenly drop by 15%. In this example the portfolio would lose 4% in one hit.
Yes, I feel constrained by the starting account size and as a consequence we will probably be trading small/mid price stocks. I understand Pav's use of leverage (even though Aust persons cannot get this leverage from IB atm) and I'd like to include a few trades in the larger priced stocks when they appear. As the portfolio collects winning trades, I would most definitely like to use some leverage and we might use a cfd type arrangement.
I'll admin this EOD and I've allocated one hour each evening to reply and post updates. I'm scanning charts for my own trading requirements as well. This work is not wasted.
debtfree: Volatility is a study in itself. The best low risk entry is when volatility is low and we plan for a price rise with expanding volatility. A one size fits all % SL doesn't work. Don't ask me for the best trailing stop strategy. I don't know of it.
I prefer to trade the high priced stocks and I'm happy to get a $3.00 move in a $60 stock with a 0.60 iSL.
I'm certainly constrained by a 50K account, unless we use leverage. I'll give you an example from today.
eg I like the AHE chart and like the current sideways range. I thought about buying 4.25 with a iSL 4.10 ( 0.15 risk). The risk:reward is enticing, but should I trade that in this portfolio? See the pos size calculations.
Am I justified using 28% of the account in one trade? I think not even though the risk is only 1% account. Any company can report bad news and the share price suddenly drop by 15%. In this example the portfolio would lose 4% in one hit.
Yes, I feel constrained by the starting account size and as a consequence we will probably be trading small/mid price stocks. I understand Pav's use of leverage (even though Aust persons cannot get this leverage from IB atm) and I'd like to include a few trades in the larger priced stocks when they appear. As the portfolio collects winning trades, I would most definitely like to use some leverage and we might use a cfd type arrangement.
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Peter, once again many thanks for another detailed and informative answer to my questions. You have picked up what I was saying and thinking very well, I appreciate the effort and time you have given me in the last few days.
You are correct in saying "There is a lot to be aware of and manage in between." You have given me a lot to think about and some homework to do, as to catch up to where I should be at this time. I will take a few days/week to digest this and work on it, giving you a bit of time back to yourself. The added load does add up as other people say!
I have read many of Tech/a and Pav's posts over the time and found many tips and gems among them, even last night I found myself looking back through a lot of your old posts and found and saved many tips and gems as well. So thank you for the old posts to other people, they are still relevant and helpful today. Many other people have great posts as well and are worth going through and reading, my thanks also go to them.
Cheers ... Debtfree
You are correct in saying "There is a lot to be aware of and manage in between." You have given me a lot to think about and some homework to do, as to catch up to where I should be at this time. I will take a few days/week to digest this and work on it, giving you a bit of time back to yourself. The added load does add up as other people say!
I have read many of Tech/a and Pav's posts over the time and found many tips and gems among them, even last night I found myself looking back through a lot of your old posts and found and saved many tips and gems as well. So thank you for the old posts to other people, they are still relevant and helpful today. Many other people have great posts as well and are worth going through and reading, my thanks also go to them.
Cheers ... Debtfree
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EOW Update: ASF Momentum Portfolio +2.5% ( 87% in 8 stocks ) XAO -1.9% (27/2/15)
This is how the EOW update is going to look. If you would like any mods please submit your suggestion in triplicate to Dept of Funny Walks (PM me).
Note: The lower red line in the graph below shows the value if every trade was closed at their planned exit. The difference between the current value (blue line) and the red line is our total open risk. You'll notice that the new admin reduced this level significantly.
Comments:
Changes to TS triggers highlighted in yellow (SEN, AGF).
NAN, APN, AGF : plodding and if there was something better I jump at the opp.
Speaking about something better, I think the "team" has missed a typical "Pav" setup. Pav will probably spill his cocoa into his lap-rug and fall of his rocking-chair when he realises what we've missed.
This stock came up in my pm scans as today's volume put the daily ave vol above my cutoff. Have a look at SRI and tell me that isn't a Pav special.
C'mon team, we have to do better. Do we have any price/vol spike riders out there?
This is how the EOW update is going to look. If you would like any mods please submit your suggestion in triplicate to Dept of Funny Walks (PM me).
Note: The lower red line in the graph below shows the value if every trade was closed at their planned exit. The difference between the current value (blue line) and the red line is our total open risk. You'll notice that the new admin reduced this level significantly.
Comments:
Changes to TS triggers highlighted in yellow (SEN, AGF).
NAN, APN, AGF : plodding and if there was something better I jump at the opp.
Speaking about something better, I think the "team" has missed a typical "Pav" setup. Pav will probably spill his cocoa into his lap-rug and fall of his rocking-chair when he realises what we've missed.
This stock came up in my pm scans as today's volume put the daily ave vol above my cutoff. Have a look at SRI and tell me that isn't a Pav special.
C'mon team, we have to do better. Do we have any price/vol spike riders out there?
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Nice work peter2 and I like the chart which shows the at risk component. Very nice indeed.
I checked out SRI... whilst I am impressed by this week's bar and volume powering it, I don't like all the background noise (aka resistance) on this one. I prefer to trade when it is already in clear skies or when there has been a substantial basing and then moves up from there.
We are all different and I only know a few recipes for pavlova.
Love your work!
I checked out SRI... whilst I am impressed by this week's bar and volume powering it, I don't like all the background noise (aka resistance) on this one. I prefer to trade when it is already in clear skies or when there has been a substantial basing and then moves up from there.
We are all different and I only know a few recipes for pavlova.
Love your work!
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Slight change in account trading conditions. I'm going to include some cfd trades and this will give us access to some leverage. This will allow us to trade larger priced stocks. The trading costs will increase due to commission and interest costs.
I'm leaving the cap risk limit at 6% which allows us to start up to 6 trades risking 1% each. Its not risking 6% in one trade. Whenever we raise a TS on one or more open trades we reduce this cap risk and this reduction may allow us to start another trade. When we move a TS to BE we can definitely start another trade.
Atm our cap risk is 4.9% and the XAO trend is up, so we can start another trade.
Pav hid the codes on his charts as he placed them in this thread. This was to avoid any accusations of providing specific financial advice. I'm doing it differently and posting the setups in the individual stock threads. This means you will have to look for them throughout the stock chat threads.
I will only start trades in companies that are recently indicated by the ASF community. The lazy, of course will look for all my chart posts, but I'm going to use charts posted by others as well. Pixel posts a lot of interesting charts. I like the setups posted by Boggo, and Gordon7. Tech/a occasionally posts a chart analysis. Please continue guys. I will use a few of them to keep the lurkers guessing.
If that doesn't thwart them this might. On many occasions I've read interesting comments that have led me to a chart with a good low risk setup. These "guys" don't post charts but their comments are always worth considering while looking at the charts. I refer to skc, craft, SilverRanger, VSntchr in the pairs thread. Even the contrarians (notting and So Cynical) occasionally post a valuable hint.
Sorry, I've left a lot of frequent posters out but these are my fav's that come to mind. In conclusion, the source of all the trades in this thread will come from the ASF community, both directly and indirectly. Please keep those posts coming.
These are the charts I'm monitoring daily for new entry triggers: CNU, TRS, AIA, CGF, AHE
I'm leaving the cap risk limit at 6% which allows us to start up to 6 trades risking 1% each. Its not risking 6% in one trade. Whenever we raise a TS on one or more open trades we reduce this cap risk and this reduction may allow us to start another trade. When we move a TS to BE we can definitely start another trade.
Atm our cap risk is 4.9% and the XAO trend is up, so we can start another trade.
Pav hid the codes on his charts as he placed them in this thread. This was to avoid any accusations of providing specific financial advice. I'm doing it differently and posting the setups in the individual stock threads. This means you will have to look for them throughout the stock chat threads.
I will only start trades in companies that are recently indicated by the ASF community. The lazy, of course will look for all my chart posts, but I'm going to use charts posted by others as well. Pixel posts a lot of interesting charts. I like the setups posted by Boggo, and Gordon7. Tech/a occasionally posts a chart analysis. Please continue guys. I will use a few of them to keep the lurkers guessing.
If that doesn't thwart them this might. On many occasions I've read interesting comments that have led me to a chart with a good low risk setup. These "guys" don't post charts but their comments are always worth considering while looking at the charts. I refer to skc, craft, SilverRanger, VSntchr in the pairs thread. Even the contrarians (notting and So Cynical) occasionally post a valuable hint.
Sorry, I've left a lot of frequent posters out but these are my fav's that come to mind. In conclusion, the source of all the trades in this thread will come from the ASF community, both directly and indirectly. Please keep those posts coming.
These are the charts I'm monitoring daily for new entry triggers: CNU, TRS, AIA, CGF, AHE
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Peter: You and the more experienced traders on this site will most likely know all the following well and truly, but others like myself, probably not. I thought I would send it on to view the results of what we have spoken about in earlier posts.
You made me do some homework in regards to the distance from the Buy Price to the Initial Stop Loss Price and the different effect it has overall. Below are 12 tables and also another 2 tables over to the right I played around with.
The first 4 tables across the top are a larger priced stock and in this case we will use your $60 stock. All 4 across are with the $60 Buy Price. Table 1 contains the trade with the high price trade you prefer, the $60 stock with a $0.60 iSL, so a Stop Loss @ $59.60
All 4 tables across the middle contain let's say a medium price stock, the AHE trade with the $4.25 Buy Price. Table 5, contains the AHE trade you spoke about with buying at $4.25 with a $0.15 iSL, so a Stop Loss @ $4.10
All 4 tables across the bottom contain a low price stock with a $1.00 Buy Price.
What I wanted to do was put in your high price trade and the AHE trade and also a cheap stock into the tables along with other various stop loss distances away from those buy prices and see what stood out to me. I also wanted to see what happens if the scenario you spoke about if a stock did plunge 15% and the effects that resulted from this event.
All thing were even: The starting bank was $50K, 1% of the bank was risked for each trade which was $500
I looked at your trade No:1 and seen the stop loss was 1% away from the buy price and the total cost of the trade was $50K which I thought confirmed my thoughts of trading larger price stocks was a no-no with a smaller bank, it took up our whole bank if we traded with our $500 risk amount. (Yes, don't worry I know you're not trading a $50K bank) but I was surprised when I looked at the cheaper No:2 & No:3 tables with the same 1% stop loss and the total cost was $50K as well. The penny drops when you see it front of you then you say, ahhhh of course it would. The same could be seen with the 4 different stop loss levels, 1%, 3.5%, 10% and 15%, it doesn't matter what price the stock it is, it's how close your stop loss is to your buy price is what chews up more of your bank.
Now to the AHE trade No:5 table and your are right when you said the cost total cost was a little over $14K which was 28% of our bank and if it fell 15% it meant we would lose 4% of our bank in 1 hit. In the No:1/2/3 tables with the 1% stop loss I see that it would lose $7,500 or 15% of our bank, which is 15 trades of risk. So once again it seems that the closer our stop loss is to our buy price it increases our total costs, our amounts we lose if the stock falls, and also it increases the number of trade risk lost. 1% loses 15 lots of trade risks, 3.5% loses 4.25, 10% loses 1.5 and 15% loses 1 trade risk.
In the top right of each table 1 - 12 in the blue cells I've divided our starting bank by the different amount of trades in our portfolio giving an average cost of each trade. No big deal but I just put it in there for my viewing.
The last 2 tables on the right side with the black headers and yellow arrow (Maximum - S/L - Minimum) I have put in stop loss level s away from the buy prices of 7% & 15%. I see that the 15% will only lose 1 trade risk if the share price drops 15% which makes sense and the 7% will lose a little over 2 lots of trade risk. I also noticed if your stop loss % was the same for every trade (which is impossible for this type of trading) and you divided your bank by the same number it would equal the total cost of each trade. I think I remember Tech/a saying something about he found between 8%- 12% was the sweet spot and now after this I tend to agree with him. Between 7% - 15% enables you to split your bank up into quite a few stock and at the same time reduces the impact if some stocks drop by 15%.
Like I said before, maybe nothing new for experienced traders but I thought I'd pass it on anyway.
You made me do some homework in regards to the distance from the Buy Price to the Initial Stop Loss Price and the different effect it has overall. Below are 12 tables and also another 2 tables over to the right I played around with.
The first 4 tables across the top are a larger priced stock and in this case we will use your $60 stock. All 4 across are with the $60 Buy Price. Table 1 contains the trade with the high price trade you prefer, the $60 stock with a $0.60 iSL, so a Stop Loss @ $59.60
All 4 tables across the middle contain let's say a medium price stock, the AHE trade with the $4.25 Buy Price. Table 5, contains the AHE trade you spoke about with buying at $4.25 with a $0.15 iSL, so a Stop Loss @ $4.10
All 4 tables across the bottom contain a low price stock with a $1.00 Buy Price.
What I wanted to do was put in your high price trade and the AHE trade and also a cheap stock into the tables along with other various stop loss distances away from those buy prices and see what stood out to me. I also wanted to see what happens if the scenario you spoke about if a stock did plunge 15% and the effects that resulted from this event.
All thing were even: The starting bank was $50K, 1% of the bank was risked for each trade which was $500
I looked at your trade No:1 and seen the stop loss was 1% away from the buy price and the total cost of the trade was $50K which I thought confirmed my thoughts of trading larger price stocks was a no-no with a smaller bank, it took up our whole bank if we traded with our $500 risk amount. (Yes, don't worry
I know you're not trading a $50K bank) but I was surprised when I looked at the cheaper No:2 & No:3 tables with the same 1% stop loss and the total cost was $50K as well. The penny drops when you see it front of you then you say, ahhhh of course it would. The same could be seen with the 4 different stop loss levels, 1%, 3.5%, 10% and 15%, it doesn't matter what price the stock it is, it's how close your stop loss is to your buy price is what chews up more of your bank.Now to the AHE trade No:5 table and your are right when you said the cost total cost was a little over $14K which was 28% of our bank and if it fell 15% it meant we would lose 4% of our bank in 1 hit. In the No:1/2/3 tables with the 1% stop loss I see that it would lose $7,500 or 15% of our bank, which is 15 trades of risk. So once again it seems that the closer our stop loss is to our buy price it increases our total costs, our amounts we lose if the stock falls, and also it increases the number of trade risk lost. 1% loses 15 lots of trade risks, 3.5% loses 4.25, 10% loses 1.5 and 15% loses 1 trade risk.
In the top right of each table 1 - 12 in the blue cells I've divided our starting bank by the different amount of trades in our portfolio giving an average cost of each trade. No big deal but I just put it in there for my viewing.
The last 2 tables on the right side with the black headers and yellow arrow (Maximum - S/L - Minimum) I have put in stop loss level s away from the buy prices of 7% & 15%. I see that the 15% will only lose 1 trade risk if the share price drops 15% which makes sense and the 7% will lose a little over 2 lots of trade risk. I also noticed if your stop loss % was the same for every trade (which is impossible for this type of trading) and you divided your bank by the same number it would equal the total cost of each trade. I think I remember Tech/a saying something about he found between 8%- 12% was the sweet spot and now after this I tend to agree with him. Between 7% - 15% enables you to split your bank up into quite a few stock and at the same time reduces the impact if some stocks drop by 15%.
Like I said before, maybe nothing new for experienced traders but I thought I'd pass it on anyway.
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