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Sharing my experience for new traders

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Hello every one.

I thought as a member of this fantastic community, I will share some of my experience as a trader so that new traders don't end up making the same mistakes that I have made over the years.

Firstly, I am not a professional trader however, I have been doing this on and off for a few years now. I am sure there are other members in this community that have a lot more experience and can contribute to this thread. Like I have indicated previously this thread hopefully will help new beginners in making profits.

 

Okay, if you are reading this then I will assume that you have an IG account. This is one of the most important aspects of trading in my opinion. Having a good broker with an excellent trading platform. I have used many platforms previously and am happy to say that IG has met all my expectations and more. I need to point out that I am not an employee of IG. The fact of the matter is they offer a fantastic platform built for mobile and web. So naturally, the first point that I would make to a new trader is to find a reputable broker.

 

Secondly, in keeping with the theme of brokers, ensure that they have a demo account option. Lucky for us, IG wins on that front as well.

 

Now that you have your account opened, and funded, you are ready to trade? Not yet... This is one of the biggest mistakes that I made when first starting out. I was so eager to trade, that I ended up losing a good portion of my initial investment. If I could turn back the hands of time, I would of spent more time reading, reading, and more reading. There is so much of free information available on the Internet and YouTube that you have no excuse to learn what in fact CFDS are and, how they work. I wish someone had told me that before I thought I knew everything.

 

I am going to call this post one. If this is something you guys think I should continue updating then I will in instalments. Looking forward to your comments and opinions on this thread.

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question to all from a new trader

 

how do I setup a trailing stop that cuts to ensure you keep some profits..?

 

Ie, I sleep during most UK and US trade for work, live in AUS and would have enjoyed the dip from last night but cut off before the big dip.

 

Is there a simple step by step to set the trailing stop..?

 

 

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Hi   The mechanism for an automated trailing stop will depend on your account type and platform.

 

Check out this page from IG's education section for explanation and examples or the help manual for the PRT platform.

 

https://a.c-dn.net/c/content/dam/publicsites/1468921675548/igcom/uk/files/education/CFD/ig_cfd_tradesense_chapter3.pdf

 

 

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Hi Dash 1,

 

Sorry for the delay.

 

I am looking more into the trading groups like you said in your last post to me. Except for IGs trading group where can I find these usefull groups? should I seek google to find this info, however as you know one can be led up the wrong path on trades so really need to find a trust worthy one..

 

With this IG group i do find some of the swarks and reports not up to date? but great that IG supply this info.

 

Trev..from south London btw. 

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Cool thread! Could have done with reading this three years ago.....

The idea of joining a trading group is such a good idea. I find it's quite lonely and don't know anyone.... :-( ......

I use trend lines, fibs and MA quite a bit. Increasingly watching the news as I got caught with my pants done with no guaranteed stop....

Moving the stop and chasing the trade - still trying to train myself into good habits. Also over trading as I don't have a 'formal' strategy....

Anyway, thanks everyone for sharing. Much appreciated.

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Write these rules down and stick them to the wall above / beside your PC and keep adding to them as you learn more. It's about being unemotional; ok almost robotic but you can have a feeling just don't break the rules

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Hi, I thought I'd share my experience as a trader in BIOTECH stocks on the US exchanges. I have been trading with both cash (shares) and leverage/margin (CFD) since 2012 on/off as this is my hobby and I trade because I enjoy it. I do day, long and some short term trading. I would say I am not a technical trader, but I do use indicators such as charts, fundamentals, investor sentiment and of course some DD (due diligence) to guide me in trades. I am not very advanced (some would say smart) as I do not do spreads and rarely trade with stops. I will try and explain why later.

 

So before I start let me share some thoughts with you, some seen through the eyes of a day trader:

  1. Decide what you are trading for. Is it capital gain or (additional) income? This is important as it should determine the type of trader you will be.
  2. Try to focus on one market i.e. I only trade in the BIOTECH segment, but not saying I will not do a quick trade in another market. But try and focus because when you get out there it is a big world and there is money to be made in every corner, according to the market makers, fellow investors and so on. You can get defocused quiet easily, and you cannot keep up with the flow and amount of information. After all you are trying to make an informed decision on whether to enter a position or not.
  3. Are you a positive (bull / long) or negative (bear / short) trader, or maybe both? For long trading either or will work fine, for day trading you probably should look into doing both because of the market mechanics (up and down). Obviously don’t alternate and be a bull one day and a bear the next, but follow the market trend – here is where charts come in handy.
  4. Whether you day or long trade set up a goal. How much do I want to make per day, per week or per month. Keep in mind that even if you “only” set your goal to $100 per day it is still $100x22days=$2200 per month! And it is easy to make the $100 by doing day trading i.e. you buy 1000 shares and therefore only need a $0.1 up or down, not taking fees, taxes and so on into account. But keep in mind, the longer in the future your goal is, the higher a stock need to go up, or down for that matter. Most importantly, do not be greedy. Exit at your goal. When you become greedy you lose money. Easier said than done I know. We are humans and want to make as much as possible. No one wants to exit too early and then see a stock take off – that will leave you with a lot of regret, but so will a late exit and a big drop!
  5. Many have said it before, but it is important. Never invest more than you are willing to lose in a particular trade. So again set a goal for what you will accept in loss. You will get emotional; especially when a stock goes the wrong direction, but never double up or down to avoid loss. Or for that matter take a reverse position, it can get very messy. Many times you cannot salvage an investment gone bad, but will only end up with a bigger loss. Cut it loose and take the loss. Yes I did not mention stop loss. I will explain later.
  6. Trading is emotional, especially because you are trading with your own money. So if you do a demo account first you will see you will do better than when you start trade with your own money. It is difficult to pull the trigger when it is your own money. Try and overcome that barrier. I did it by keeping track on all my trades until I became comfortable with trading (pulling the trigger). I wrote down the entry and exit point and P/L. I actually still write down my entry target price, but on a post it.
  7. Plan your trade/day. Pick out your targets and do research on them, settle on an entry price and most importantly do not chase the stock if it starts to move unexpectedly! That is when you become a bag holder. Timing is difficult in the market and sometimes you miss the boat. Learn to let it go and move on to the next stock, same as you need to learn to leave money on the table. Maybe plan on catching it on the reversal if you missed the boat the first time around :smileywink: But remember there is a reason for why it moved, so be careful.
  8. Never fall in love with a stock! Again it is all about emotions, and there are more retail investors than ever, and most of them are emotional and in love with their stocks. So they trade irrationally and can cause big swings in the market which some market makers take advantage of i.e. bear or bull raids.

 

Let me try and explain some of the points I made earlier, and cover it mostly from a day trading perspective.

 

So what are you trading for? Answering that will help you figure out whether you should day trade or not. I also guess you should look into how much time you can and are willing to spend each day. Day trading is almost a full time job, between research, planning and trading. However, if you day trade it is most likely because if you are looking into using trading as a way of supporting yourself or to gain additional income every month.

 

As stated earlier I chose BIOTECH for my trading. I think they give you a good coverage of all the types of trade you can do such as day, swing, mid and long trading. Also they are more fun because they have a lot more catalysts that can drive them both up or down, and are not necessarily bound to the quarterly earnings reports such as a Google or Apple stock is. However, the catalysts do make them more volatile, but in some way I find that they are more predictable. An added bonus is the upside the stocks have. Take for an example a stock like DCTH that gained +1000% over the past 14 days. Keeping focus on one or at least a narrow set of the market will definitely help you get to know the stocks, the market, the investor sentiment and behaviors; and this is important if you decide to day trade. Also it might help you land one of the big movers. I will explain.

 

While the market is overflowing with emotional retail investors with irrational trading behaviors, you are trading in a market that is primarily driven by robots, algorithms and time. But let us begin with the retail investors in the BIOTECH segment. The reasons I stated above about the BIOTECH segment is also one of the reasons for why you find, I guess, majority of the retail investors here. A chance to make a quick buck and stocks trading at prices where most people can afford to be in them in cash, and at the same time get a good chunk of shares.

 

The problem, if you will, with the retail investors is they trade with their emotions. This is, however, understandable as they are trading with their own money and an ambition to retire overnight. As I said earlier when you get to know the segment you are trading in, and the investors you can use their sentiment as an indicator for trend on a specific stock. Most do not care about the fundamentals, but are chasing the $, so when someone spread good vibes around a certain stock you will see people and money flow into the stock. The same goes when the vibe turns negative, money will flow out. DCTH is probably a very good example of this. Monday (19/6-2017) the sentiment turned positive, money was flowing into the stock. Come Tuesday sentiment was raising on ANY (tech stock) and DXTR and today (Thursday) they exploded – with no catalyst behind, only investor sentiment. It normally takes about 3 to 4 days for a stock to reach its peak, and after that it sells off again and the scalpers are off to look for their next target. Good or bad, it can sometimes be positive for a stock as it can settle higher than where it started. But whether it will be able to maintain the level is another thing. You should always do DD before entering such a stock so you understand if there is anything that can drive it higher after the selloff – if you plan to be long in it.

 

The irrational trading part is seen during the rise and fall of the stock. Shorts have stop loss sitting to close or panic and selloff, causing the stock to rally higher. During sell off you see the ones that were chasing the stock panic and sell off to avoid becoming bag holders, causing the share to plunge and take out a couple of long stop losses out on the way down. This is why I do not trade with stops, as it can cause a premature exit and the stop would either way need to be so low or high that it makes no difference – thanks to the emotional retail traders. Also, this is why it is important that you have your exit strategy in place and stick to it. Don’t get emotional and try for that extra cent! It could turn a great run into an ugly bag, or you exit at a lower than planned profit and a lot of regret. If you decide to follow one of the many forums for retail investors, then check your emotions before entering. It can be hard not to get carried away when people throw big numbers out on a stock you are in.  

 

I use charts, but only as an indicator for direction. This tie back to the comment on robots, algorithms and time I made earlier. I normally use a 24 hour and 3 months chart displaying Bollinger bands and MACD. This is a personal preference, so right or wrong (remember non-technical trader here), I advise you figure out what indicators suit your trading pattern and you are comfortable using. For me it gives me an indication on the direction to invest in, long or short.  Trading is computerized so it is done by robots that adhere to algorithms. This is why I use the Bollinger band as a stock that trades rationally will stay within the band. If and when it falls out of the band, the robots will try and correct it back. It should also give you an idea on what to expect on the price range when it is corrected back into the band. I use the MACD to get a sense on when the direction will change. When the MACD cross you will see the trading direction change and Bollinger band might need to adjust up or down depending on the momentum, positive or negative.

 

This post is getting a little long and I got side tracked on the day trading part. So let me close with this. If you want to day trade (without too much risk) look for a stock with these characteristics:

  • The higher your daily target, the higher the price per share should be. It gives you a higher possibility for a bigger swing.
  • The stock should not be too fast trading, but also not so slow that it might be faster to watch paint dry. Slow means more time to react and also make it more predictable.
  • The daily traded volume should probably be in the 1 million (or over) shares traded per day. You need to be able to buy in and also get out.

 

For day trading you don’t really need to do a lot of research as you are not really trading the fundamental or technical part of it. Just be aware of upcoming catalysts (read news, read IR pages and so on) that can throw a surprise in there. I know you say, don’t put all your eggs in one basket, but if you find the right basket you really don’t need anything else. Trading is pattern recognition, so find a couple of potential targets and observe them. Learn how they swing every day (up and down), how they trade at the bell (open and close) and find the right time to get in and out. Large caps are normally a good place to be in, and with the leverage on CFDs you can afford to be in. I normally tend to not do any trade for the first half hour, because at that point the market is trying to find the direction. So you will se swings up and down. Let it settle and find its direction before you get in, unless you are banking on a lower or higher entry point.

 

I hope this post will help you avoid doing some of the mistakes I did when I started out and had to find my trading style. Remember trading is risky, especially if you do BIOTECH so be careful! Happy hunting and safe trading! :smileyhappy:

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