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daytrade999
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Posts posted by daytrade999
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Hi All,
I need help on position sizing. Please help.
I understand most of the things about position sizing. But I am having troublew understanding how to use for example 1% per trade.
Ex. If i have 100k 1% is 1000, So if I bought a stock for 40000. What do I do with the 60k if I want to take another position ? Do I risk 1% of 60k of the original 100k?
Question 2: When do I adjust my capitial if I have a drwadown ofd 10%? Do I still use 1% of 100k? of the drawdown point of 90K?
Help plesae thank you . Good trading all
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Thank you all for your kind words. Having just left my rock for the sunshine I appreciate it.More apologies to dt999. The last point (11) came out more harsh than I intended. I certainly don't want to thwart anyone's pursuit of profits.
Also, very all good comments from everyone. I was gonna quote & reply but realized that would be another War & Peace.
I think the short version is that everything we mentioned is probably correct in various degrees at various times.
I have done some research and the retrace is the most frequent and predictable pattern of all, and by far.
I really believe stop hunting is SOP for brokers and other entry counter parties. Maybe they can do it because most of them play the same game and most of us retail folks follow the herd? It takes balls, money, and discipline to do the other correct things, to catch a falling knife or step in front of a bus.
Squiggly, lagging lines and channel breakouts are what most noobs do. They are always late, buy tops and sell bottoms. One can be profitable with lines and channels if the other ducks are in a row.
My studies indicate that range breakouts win about 33% of the time but still can make a ton of money.
Not many can handle that ratio emotionally. The emotions, chop and over leverage are a perfect storm to break their hearts and their accounts. I hate to see it.
The "profit taking" rationale used to be the primary explanation for retraces. And that is still valid. Yup, I am that old.
Then those pesky brokers and banks have every advantage. Their back rooms have their books and they lay off risk in a nano second for a fraction of the spread. They also track the A list traders and B list traders. I've known a few of those "bucketeers" over the years.
I overlay cme volume on my fx charts to help mitigate the "no fx volume data" dilemma. The mass of volume, or lack thereof, at certain prices and often at the end of a retrace is one of my magic beans. It keeps me from jumping in mid stream and buying tops and selling bottoms.
The biggest sin I still struggle with is entering too early. Fading the dip/rally is such a strong method I can't help myself. I quit dying a thousand deaths when I came to expect the adverse move and initiated the trade with a tiny.
Well, you didn't get War & Peace. Instead you got The Satanic Verses.
I guess I'm just lonely.
The level of discourse in this thread is outstanding. One can learn a lot here.
Hereafter I resolve to ramble less.
Bye for now.
Thanks for all these great insights
I really want to know want to verify what you said on the post. So you are saying that you trade retracemente and that this works for you. ? I apologize for my lack of understand of your terms.
Feel free to comment and respond with true honesty.
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It all depends on your expected returns.Walk first then run......
If you can get a return on 25k that is reasonable and you have minimal drawdowns, understand how and why it works etc etc etc.....only then you should leverage it to reasonable levels - depending on the instrument.
eg; stocks - unless you are running a long short book or a hedged portfolio, at 4:1, any black swan event - those that occur about every 4 years not 1 in 100
will wipe you out.alternatively you may as well go all in and try and make a killing or fail quickly then move on....
If you can live off X% return based on $X then asking 1000 people their opinions is a pointless exercise.
As Zdo rightly says - its system specific.
Just remember when you leverage - the broker will spend/loose/take your money first (your initial stake/equity) and is not in the business of providing you with risk capital. They are in the business to provide you with capital that they dont want to have at risk. For this there is a charge.... so you have to get a return over an above the interest charge first.
...and as your equity decreases so does the leverage capital....its often something people forget.
.................................
but there was an old saying that went something like this. 'There are lots of bold traders, there are lots of old traders. There are very few old bold traders' - they do exist but they are rare for a reason.
Walk then run and occasionally run hard when the opportunity allows it......
Can you explain to me how brokers can make money from me if I use leverage money? Is it the interst incurred while I use their money.?
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DayTrade999.This is a very open ended question, and there is no one size fits all answer.
Sticking to the aspect of leverage and fund managers (and not just how they invest).....
First ...
you have to understand that fund managers have an investment strategy or mandate that they follow. Its ideally their expertise, and is simply a product offered to investors. They are limited in what they can do by this mandate.
Second.....
Most fund managers dont use leverage. The vast volume/amount/size/number of fund and fund managers dont use leverage.
Those that do sometimes disguise it - because either they or their clients dont really understand it. Plus its often easier to sell something that seems less risky than it is.
(While examples such as gold will not go down to zero are valid and hence people justify that its less risky etc. Think about leverage in these simple terms - anytime you can loose more than you have available.....you are leveraged)
Third....
When it is used it can be used by borrowing from others and servicing a loan, investing in instruments that require an exchange margin, investing via other derivative products (OTC), (these do not necessarily mean the manager is leveraged), or simply investing in products that themselves are leveraged. eg; some, REITS, ETFs or other funds.
For really in depth info, there is only one answer as every fund is different. Research their investment styles and mandates.
For generic answers.....research the internet.
eg; http://en.wikipedia.org/wiki/Leverage_(finance)
Hedge funds wary of high leverage - FT.com
http://aima-canada.org/doc_bin/AIMA_Canada_StrategyPaper_06_Leverage.pdf
Whoa!! Thanks for all those links it really helps me cut down time to find them so now I will be reading up on them. All thanks to you though.
I do have one question about leverage if you or anyone can answer it. If I was to trade full time with 25k would a 4:1 leverage from the broker be able to make a living? Or do I need 100k plus of my own money to trade without using brokers money? How much does everyone here started with if you don't mind answering?
Thank you all!!
Cheers !
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True… the advice so far in this thread covered many different aspects. daytrade999, I hope you can still "see the woods" albeit all the "trees" thrown at you at onceThank you for the caring thoughts . I'm keeping up with all these helpful tips and they are really indeed improving my knowledge on trading and I'm learning something new everyday. But I am kind or getting lost on the topic of leverage though haha. But it's ok I'm learning nonetheless .
Thank you!
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I am not a "pro" - just a retail trader like yourself who treats trading a small account like an enjoyable and stimulating hobby.I make no distinction between Friday and any other day of the week, but then I'm holding positions for longer than a day. It is totally up to you what special day-of-week considerations you may have - but you should make sure you have some quantitative research to support them - how have employment numbers or air strikes typically impacted upon your strategy's performance in the past?
The "2% of capital" rule comes from managed futures, and if you're trading un-leveraged stocks it's not entirely relevant. Do you think that Buffet only invests 2% and leaves the rest in cash? *
Say you use all your available capital tomorrow to buy shares of GLD. Now, is 100% of your account really at risk? Is the value of gold actually going to fall to zero at any time soon? The only scenarios in which this might happen are "end of the world" type scenarios in which the value of your shares will be the least of your worries.
Kind regards,
BlueHorseshoe
* I believe this is one of the reasons fund managers often use leveraged products - they have a fraction of their capital funding a postion but still get the same bang for their buck as with an un-leveraged asset, and meanwhile the rest sits in t-bills etc bolstering their returns by a few extra percent each year.
Thanks for the reply,
If you don'tjnd can you explain to me about the leverage part in more detail or link me up so I can learn more about that specific topic? Because I'm really interested now that you brought that out . I want to know and understand how fund managers do their job and how they use other people's money to invest .
Thanks for your help .
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Hi Daytrade999,I have never traded individual stocks (this is a minor lie - I briefly held BP as it began to recover from the deepwater horizon spillage), so I can't provide you with specific advice like this.
The general spirit of what I am trying to do, however, is to encourage you to generate lots of ideas and then methodically test them to see what works.
In principle, the idea of using SPX as a filter for the broader market trend seems sound. But it all depends on what you're doing and what you want to achieve.
Here is an example . . . I have taken a strategy that buys a pullback in the IWC microcap ETF when IWC is in an uptrend (defined as closing above its 100 period moving average). This is the first equity curve attached below.
Then I have prescribed that the strategy buys a pullback in the IWC microcap only when both IWC is in an uptrend AND the Spider ETF (broader market) is in an uptrend. This is the second equity curve below.
Applying the overall market trend filter in this instance improved the profit factor from 5.61 to 6.73.
But it is important to realise that this is just one example and should be treated as such.
Hope that helps - go experiment - and do so in an objective and structured fashion!
BlueHorseshoe
Thanks again for these wonderful advices,
I want to also know if you or any pros in here put trades on Fridays? Especially during times like this Friday with the news on air strikes and employment numbers and fed meeting comig up. With events like these do you guys lower your risk level and trade smaller or still trade the same as you usually do with say 1-2% of your capital range?
Thanks
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Wow thank you to the part on correlations .In its simplest form, the idea would be something like:
1) Overall market trend SPX is up.
2) Stock A gives a signal for long entry.
3) Stock B gives a signal for long entry.
4) You decide that a position in Stock A is a better option than a position in Stock B because you know that A is more closely correlated with SPX than B. If SPX continues to rise then A is more likely to follow it than B, which often behaves contrary to SPX.
I like to focus on small caps but I'm not sure if the spx is the right one or should I use the Russell ?
I can't answer that for you. You will need to find a methodical way to test various possibilities. For smallcaps, you've always got IWC - but is this really a useful filter, as it can't really be considered to represent the broader market?
If you can provide me with a way to learn more about the counter trend trade part in the above paragraph I would be really grateful for that.
It's really just extending your own idea of using the SPX as a trend filter. If the broader market is trending up, and so is the sector , and so is the stock in that sector that you want to buy, then a good time to buy the stock is often following a brief sell-off. The sell-off is counter to the broad market trend, the sector trend, and the stock's own trend - there is therefore generally a higher probability that the stock's counter trend reaction will be short-lived, and the prior uptrend will resume.
This is known as "buying a pullback" (and can work in reverse, shorting brief rallies in falling markets).
It is entirely plausible that any stock will have 3 consecutive down days without there being any real significance attached to this. It is less plausible that a stock will have 6 consecutive down days unless there is some serious weakness.
Now, suppose a stock is trending up, and you decide to buy it. You decide you will exit for a loss if the stock suffers 3 consecutive down days.
The stock sells off for 3 consecutive days, and you now take a loss . . .
I also want to buy the stock (its long term trend is up), but I have waited until it has suffered 3 consecutive down days. I now enter long, and like you I decide to exit if the stock suffers 3 consecutive down days.
The stock sells off for a further 3 days, and I exit for a loss.
Can you see the difference? At the point you exited, there may have been no real weakness in the stock (3 consecutive down days are fairly inconsequential); by the point that I exited, the stock had suffered 6 consecutive down days, suggesting more significant weakness.
If the stock rallied after your exit, you may rightly have thought that you merely got stopped out by a normal adverse excursion or "market noise". If the market rallied after my exit, I would be less likely to feel so - 6 consecutive down days seem like something other than just noise, whatever happens subsequently.
This is only one approach, with simplified and imaginary examples, however, and you shouldn't allow other people's thinking to overly influence your own methods . . .
If I am wrong in my timeframe selection please correct me.
You cannot be wrong on your timeframe selection - this is something for you to decide.
Best wishes,
BlueHorseshoe
Thank you for the concise explanations . I'm taking all these information for consideration and putting them l in my plan .
I know this is not the right question to ask, but is what I'm doing using the spx as a filter and all th right thing to trade stocks? I just want to get some insights how professionals do it and retail traders do it while making consistent profit. I just want to now if what I am doing is the right path.
Thanks again.
Cheers !!
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I will bet that if you were to look closely at your results, you would find that you are at worst a break even trader but you get cut to death by commissions and spreads.Haha.i do get eaten up by commissions and I m trying to limit that by not getting in and out so often and trying to widen my stops. But I'm not even sure if this is even a right method to do so. But you're right . Thanks for that .
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It is usually a balancing act in your method. The higher the RR, the lower the win% will be. There will be a point within any method where the higher the RR lowers the win% too much that it is not profitable anymore. Also a high RR needs to be realistic and not just set as high because you need it high if you know what I mean. What does you trade log say - How would you trades that you have taken be if you set your targets at N*risk? How would they be if instead you set them at an ATR multiple?In my personal testing of every trading method I have explored over the last 9 years of full-time trading, taking 1/2 off at 1:1 and leaving the rest at BE is a bad idea. It sounds good, it feels good, and it produces worse results than if I had just taken the whole thing off at 1:1. The only exception to this was very short-term scalping in high volatility conditions. Your mileage may vary and that is what your trade log is for - test out the scenario against your real, but historical results.
With kind regards,
MK
So what would be a good exit plan to employ if the 1:1 method is not going to work in the long run? Should I use a trailing stop or just let it jot the profit target and get out of the whole position ? What do you do?
Cheers !
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Hi Daytrade999,It's good to see that you're getting lots of useful advice and ideas from the thread, and I hope it's helping you to make some progress.
I think the idea of looking at the broader market direction is a useful one. Do you look at how closely allied the behaviour of a stock and the S&P is? There are several measures you could use for this, correlation probably being to simplest. Is the S&P the best representation of the broader market? What about an ETF like VTI, which is all US stocks? If you're putting on numerous positions each day in individual stocks, are you hedging against market shocks?
Try out lots of ideas. For example, what happens when you trade counter-trend in a stock that is trader counter to the direction of the sector and broader market? What about if the stock is trading short term counter to it's own longer term trend? What happens if the sector trades counter to both the broader market trend and it's own long term trend - which stocks in the sector are the best to trade - those that lead or lag?
Learning how to do all of this with a computer (rather than by hand) is by far the quickest approach in the long run.
Also, instead of allowing suggestions like mine or anyone else's to influence you decision to trade or not to trade, another option is just to stick with much simpler criteria for that decision, and then allow all these filters to influence the size of the position.
As for what happens next in terms of your employment/education, then there is a simple solution - trade end-of-day only and get on with the rest of your life for the rest of the time.
Kind regards.
BlueHorseshoe
Wow thank you to the part on correlations . I was always interested in how markets move and how I can counter trade different types of market. I really like to use the spx to gauge the market because I know the professionals are doing it . I like to focus on small caps but I'm not sure if the spx is the right one or should I use the Russell ? Either way the spx is still very useful to me .
If you can provide me with a way to learn more about the counter trend trade part in the above paragraph I would be really grateful for that .
Also I only look at end of day charts because they are more reliable to me. I usually use the 60 min to focus on during the day time and the 5 min for execution to get the best price. If I am wrong in my timeframe selection please correct me.
Overall thank you for the help !
Cheers !
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Your problem is too common so be sure it has nothing to do with your intelligence or ability. It mostly has to do in my opinion with the naive ways to trading you were exposed to through reading of books, associations with self-proclaimed gurus and article reading in the Internet and trading magazines. I do not know the details of what you do but in general to make money you have to move beyond what is common knowledge about trading.A few very important things in my opinion:
(1) Be adequately capitalized (this is a must read article for all new traders)
(2) Aim at a high reward:risk ratio. If you have a low R:R you need to be correct very often and that is hard, if not impossible.
(3) Leave intraday trading to the experts and robots. You cannot compete with that class or you will lose everything and they will have a nice time with your money. Learn first how to win in position trading with wide enough stops and large enough objectives to have a high R:R.
(4) If you will use technical analysis make sure you can use it better than the experts otherwise they will enjoy your money.
(5) Avoid leverage and trading on margin. Eventually your lenders will get you.
...and do not quite trading, just downsize until you understand what is going on because now you do not. Good luck to you.
Thank you to thirds great tips .
These really reflect what I was and am still doing wrong. But now I can use these to refine my trading plan. I was always thinking about a 1:1 risk reward a d once I get to that target I will take half the position and put the stop at break even. But seeing having higher R/R is good I think I might try this out with a wider stop.
Thank you !
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20-25 stocks a week is quite a lot from my own experience and keep in mind that trading is not a race...one should not trade all the time as the risk of overtrading is quite high and no one is right all the time.....while I am not trading stocks, but mainly currency markets, even there this is what I usually do: I look at all possible currency pairs (26 pairs I am watching) and, by the time a specific pattern appears on any one pair (but on a high enough time frame - looking from the 4h chart and above), then I am focusing on the next week on that one pair: going down to the 1h chart and even lower for the 5 min chart and look for all the clues to confirm the pattern on the higher time frame....and the account I am trading is directed on that specific pattern and currency pair until the pattern is done......this might take some time as sometimes I am trading contracting triangles on the daily chart and by the time a contracting triangle is breaking might be weeks/months, and that should keep me busy quite some time.....
another advice I have for you is to take into consideration price is mainly consolidating than trending, so trying to look for the begining of a trend is not that easy, as trends do not change/start that often....so look to trade for small profits 20-30 even 10 pips, but try to do 5-10 trades a day and you will see that you are having 100 pips profit possible to be make when price is actually moving a lot less.........
last but no least, divide your entries...scale into a position
good luck
Thank you for the great insight this really helped me sort things out.
Regarding the time frames wha do ou suggest is a good approach to it such as exits wise? Do you get out on the 60min or a trailing stop ? (For stocks I wood use dail and weekly for main trend and 60 to monitor the traceable 5 Minfor precise low risk entry). What would you do ?
Cheers!
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20-25 stocks a week is quite a lot from my own experience and keep in mind that trading is not a race...one should not trade all the time as the risk of overtrading is quite high and no one is right all the time.....while I am not trading stocks, but mainly currency markets, even there this is what I usually do: I look at all possible currency pairs (26 pairs I am watching) and, by the time a specific pattern appears on any one pair (but on a high enough time frame - looking from the 4h chart and above), then I am focusing on the next week on that one pair: going down to the 1h chart and even lower for the 5 min chart and look for all the clues to confirm the pattern on the higher time frame....and the account I am trading is directed on that specific pattern and currency pair until the pattern is done......this might take some time as sometimes I am trading contracting triangles on the daily chart and by the time a contracting triangle is breaking might be weeks/months, and that should keep me busy quite some time.....
another advice I have for you is to take into consideration price is mainly consolidating than trending, so trying to look for the begining of a trend is not that easy, as trends do not change/start that often....so look to trade for small profits 20-30 even 10 pips, but try to do 5-10 trades a day and you will see that you are having 100 pips profit possible to be make when price is actually moving a lot less.........
last but no least, divide your entries...scale into a position
good luck
Thank you for the great insight this really helped me sort things out.
Regarding the time frames wha do ou suggest is a good approach to it such as exits wise? Do you get out on the 60min or a trailing stop ? (For stocks I wood use dail and weekly for main trend and 6
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Thank you estate 1997,
Do you guys suggest picking 20 -25 stocks a week as a watch list good enough to start or wood that b to much to look at? And by filter , wha does the mean btw I'm not very familiar with that . It someone can expand on that it would be great.
Cheers!
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Thanks all for these great suggestions . Big thanks to sweet n sour you really made it clear and concise for me. I will narrow my options down to a very limited number and focus on there price behavior for now to get the feel. I really appreciate this. If further recommendation and helpful ideas come by I would really be grateful for the advices ahead.
Thanks everyone .!!
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Hi everyone, Thanks for the kind replies.
My timeframe for trading is I go with the daily and use the weekly for the overall trend. I will go and trade with the direction of the trend. Sometimes I get stopped out due to having a too tight of a stop to get more shares, I just don't understand how to get a higher risk reward trade without risking less for more.
I trade stocks mostly because of the wide variety of options to choose from. I trade small caps because I think this gives me a better chance for gains with a small account. (I might be totally wrong please correct me if I am wrong.)
What I typically do to put on a trade is to look at the overall market by checking the SPX and the SPY. Then I would watch if rice is making HH,HL or LL,LH to go with the short term trend. Then I will check all of the 9 sectors in the SPDR and see which ones go with the direction of the SPX and narrow it down to a screening processes in a scanner and look for stocks that are going with the trend of the general market and its corresponding sector. And I will just simply pick a dozen of stocks to watch to make a trade the next day.
This is all I do and I am not sure if I am on the right path but I am still losing. I think my problem might just be having a too tight of a stop on position because I am greedy and anxious and having a small account. (I think these are my weaknesses) But please give me suggestions I really want to become a full time trader one day and school is almost out for me and the real world is fast approaching that means a job is require and time spend trading will be limited.
Thank you all for reading .
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Please anyone can you give me some help ?
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Hi everyone,
I'm having problem with my trading and I want some help . I consider myself a swing trader and my method is following the trend and watching price action as confirmation for entry. My problem is I'm always losing . There are times when ny positions are in profit but I'm just not so sure when to move ny stops and then I get stopped out even when the trade was right. I try to cut losses by closing out positions that are not working the next day and Minot even sure if this is what people say cutting your losses short means. I need help people . Thanks .
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Thank you for the replies, never would expect people to answer it .
My approach to trafing is jus watch price and waiting for it to go higher to lower and then place a trade. I use the ATR to set profit target . But sometimes I feel anxious and scare that another trade will turn to a loser even though it made some profit but never it the target . I feel like me moving my stops to limit risk is limtimg profits because of stop outs .
Sorry for bad grammars . Thank you .
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Hi everyone , this is my first post and a cry for help if you want to think of it that way.
I am having trouble in profit taking. Whenever I make a trade, the trade becomes profit but I always let it go to a small loss. I don't know when to take profit. When I get profit I feel like the trade will go up more but never take profit mowing it will not happen . What can I do to have a exit strategy too be profitable! Please help
How Do.i Explain in Job Jnterview ?
in General Discussion
Posted
Hi guys help me,
I graduated college in September and have been trading and honing my skill. I have learned a lot and now I am ready to get a job to earn money to find my account. I don't know how to explain to employers in a job interview about behavioral questions and skills. How can I use my trading skills to explain to them I can do the job? I'm afraid they mind think I'm a gambler or just doesn't know what trading is?
He'll please
Thanks