Your "Best" Trading Rule for Beginners

[tech/a]

Cheers for the response tech. Its an interesting approach - and raises a bunch of additional questions for me. I've been trying to apply VSA intraday when observing 1 and 5 minute charts and can see merit in it. (the emotional discipline to read the signals without confirmation bias is still the biggest challenge if actively trading, and of course I'm only a novice in the interpretation of the volume as well).

When you have watched 1000s of charts it becomes clear what is about to unfold with a better chance than 50/50 often very high probability.The grey matter sees it better than the software---when its blatantly obvious BOTH agree (You'll see an alert) Practice reading each bar with the life of the bar 3-4 bars.IE if you see a high volume wide range down bar you'll know if its a capitulation or renewed selling in the next 3-4 bars.

One thing that I'm curious about in the situation you describe is the decision to hold overnight yet using such tight intraday stops. I'm assuming the tight stop is only your entry stop but once you are in profit you have more loose exit criteria. (otherwise, given that a 4c range tends to be about the minimum range for a 5 minute bar you'd be in and out much more frequently I'd imagine).

My stop is now at breakeven and the + side is more than a few cents so there is some room. My decision to buy AND hold was based on the Wave 4 unfolding in both the index and the charts trading. The quick drop on lowish volume indicated to me upside is still possible. The US futures went from negative to positive through the trading day as did the HSI and other bourses regained a lot of their initial loss.So tentitively in the water.

In relation to the broader day to day trend - are you using VSA for that decision or Elliot/other factors? And prior to Friday's open were you already planning to open a trade to hold overnight but waiting for some intraday confirmation, or was the decision to enter for an overnight hold made as a result of intraday activity combined with the daily charts? Or was the overnight hold decision a default based on no exit criteria being triggered by days end?

No I made the decision intraday.Thought that it was possible Id hold if there wasnt a reason seen that showed late sell off.It was really all intraday with one eye on the wave 4 developement in both the Index and the charts traded.All correlate.So in some ways all of your questions.

I guess I can see a lot of merit in the approach you are describing for day trading but am finding the risk inherent in an overnight hold hard to reconcile with the rest of the approach.

I havent traded for a few days so if I'm trading long I want to be on the Right side all be it this maybe the last stint for a while.Frankly I'm looking seriously at the SPI/NIKKI and HSI---you really need to be able to trade both ways!

 

[Wysiwyg]

I think one of the most important things I have learnt, which is barely mentioned, is just HOW DIFFERENT the same market can be, day to day.

That`s right, yet to see a same situation myself, sometimes mildly similar.Initial stop loss moved to break even or better as soon as possible.From there, good luck.



p.s. sorry tech/a, looks like our posts were out at the same time and didn`t mean to post over the top.

 

[kam75]

1. Always USE STOPS.
2. BE DISCIPLINED to your system.
3. If your trade fails to follow through, GET OUT.
4. Use SOUND MONEY MANAGEMENT.
5. Avoid all spruikers like plague. Your best trading will come from within.

regards

 

[mazzatelli1000]

Read a bit of her and I like her style.

But never heard her mention the things I said above......that is just my own experience.

Hahaha
Nothing wrong with the Raschke. She says she hasn't met that may successful mechnical traders and is a fond supporter of discretionary trading

 

[cuttlefish]

tech - thanks again for another detailed response - appreciated.

 

[MRC & Co]

Hahaha
Nothing wrong with the Raschke. She says she hasn't met that may successful mechnical traders and is a fond supporter of discretionary trading

Ah k, never heard her say that, but the woman can trade up a storm, that's for sure! I'm sure there are some good mechanical traders out there, there appears a couple around here and I have heard of a couple more in Australia.

Agreed Tech, need both sides at the moment. You may like Nikkei, most technical and good trends from what I hear and see.

You prob won't like HSI if you want tight stops. You will probably pay quite some slippage with the spreads and slow fills.

SPI is good, but there is a lot of BS in there, low liquidity so easier for guys to push it around, squeeze, false breaks etc.

That's my opinion anyways.

 

[BentRod]

"He who picks bottom gets smelly finger"

Don't know where this one came from but I remember having a giggle when Nick posted it somewhere.

 

[BentRod]

"It's not about how much you make, it's about how much you keep"

 

[cuttlefish]

No I made the decision intraday.Thought that it was possible Id hold if there wasnt a reason seen that showed late sell off.It was really all intraday with one eye on the wave 4 developement in both the Index and the charts traded.All correlate.So in some ways all of your questions.

Certainly proved to be a good decision - it had a nice morning run up.

 

[tech/a]

Yes.

 

[tech/a]

Sold out all positions today.
Reason
Out of the office most of tommorow.
Thats the OOTOT indicator on your drop down menu.

 

[strudy]

Have a trading plan set up which suits your kind of trading.

It should Comprise entry and exit strategies, your preset profit margins,stop losses margin to minimise losses just as a minimum.
And most important of all, Stick to it.

Strudy.

 

[josh_in_a_box]

Do Not do anything you cannot understand and apply.

 

[BrendonC]

Hey All,

I think the best rules for beginners are based around good money management. Cutting your losses is important but knowing when your stop loss will be before you enter the trade is very important. Never make a decision while you are in a trade when to cut your losses. Your trading plan should tell you when to enter, what price to take profits and cut losses before you even enter a trade.

There are also important lessons knowing which money management strategy is suitable for which market condition. In the current market conditions, it is important to make sure you enter stocks within a trading range, entering at pivot points near historical low support levels and make sure your stop loss lies below all the fluctation, (usully below support levels to avoid getting stopped out before achieving profit ) I also make sure that my profit target is at least 1.5 to twice my stop loss %.(Maximize your profits, Minimize your Losses). When deciding your profit target also consider the recent historical price highs over time to see what is the probability of acheiving different price levels in your desired time frame. remember we never know where prices will go, all we can do is make calculated guesses with good money manegement. diversify, diversify, diversify.

Cheers
Brendon

 

[It's Snake Pliskin]

Hey Brendan,

I think the best rules for beginners are based around good money management.

Some pertinence there.

Cutting your losses is important but knowing when your stop loss will be before you enter the trade is very important

.
Yes, and also clicheable.

Never make a decision while you are in a trade when to cut your losses.

Clicheable again.

Your trading plan should tell you when to enter, what price to take profits and cut losses before you even enter a trade.

Not necessarily. There is some debate about targets vs letting them run out of puff puff.

In the current market conditions, it is important to make sure you enter stocks within a trading range, entering at pivot points near historical low support levels and make sure your stop loss lies below all the fluctation, (usully below support levels to avoid getting stopped out before achieving profit ) I also make sure that my profit target is at least 1.5 to twice my stop loss %.(Maximize your profits, Minimize your Losses). When deciding your profit target also consider the recent historical price highs over time to see what is the probability of acheiving different price levels in your desired time frame. remember we never know where prices will go, all we can do is make calculated guesses with good money manegement.

Not suitable for a beginner without a mentor showing what this means.

diversify, diversify, diversify.

Diversification is often quoted and is often misunderstood. Is it effective?　Yes and no.
Cheers..

1 rule from me is to learn it yourself and don't tell anyone you trade.

 

[BrendonC]

"Some pertinence there."
.
"Yes, and also clicheable."

"Clicheable again."
=========================

Hi Snake Pliskin,

Thanks for your feedback.
I certainly want to provide what is the most relevance for new traders. All I can comment on are lessons I have learn't and feedback from those of my graduates. For new traders I find that taking the emotion our of trading requires a set of rules to stick to and if they are shooting from the hip with new decisions mid way through a trade it can create a lot of inconsistency and inability to measure what is working and what is not. So I stilll encourage new traders to develop a mechanical system that allows them to reduce the emotional decisions mid trade. I agree clicheable but very important for new traders. I can show a trader a system that is 70% probability but if they don't follow these basic trading rules nothing will work.
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"Not necessarily. There is some debate about targets vs letting them run out of puff puff."

Yes, I agree, there are lot's of different strategies for maximizing profits. For a new trader it is important though to stick to mechanical rules which are set before you enter a trade. No one knows where a share price is going to head and many a time I have made mistakes by holding on too long thinking I will take advantgae of an exhaustion gap in a trend and that little bit more, often my biggest mistake before it tumbles back down again. If I ever want to let a stock run out of Puff to hold on for more, I would apply a scaling out strategies, which is simply selling portions of your position and leaving a little on the table after you have locked in profit. Warrne Buffet says he made an absolute fortune buying to late and selling to early. I agree completely.
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"Not suitable for a beginner without a mentor showing what this means."

Yep I agree completely, my bad. In my next post I will show more graphic examples of trading ranges in the current markets and how each person can design their own effective money management strategies to suit their risk profile.

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"Diversification is often quoted and is often misunderstood. Is it effective?　Yes and no."


Diverisfication is something that must be applied and each trader/investor must decide how much to diverisfy depending on the strategies and trading instruments they use. Example: if trading indexes it is more difficult to diverisify compared to equities. It is very important to diversify but not too much. I will discuss a good balance of diversification based on risk and reward in my next post.

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"1 rule from me is to learn it yourself and don't tell anyone you trade.[/QUOTE]"

respectable quote, but I often follow principles of contribution. You get back what you give. It is difficult for begginers to learn the hard way and helping others to learn from my own lessons learnt and those of my mentors is very rewarding.

I hope this information is helpful for begginers otherwise why are we even here.

Cheers
Brendon