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Trying to get it right from day one - Learning as I fail


jandj

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HI J and J 

exellent ideas . I thought the whole idea of trading was to make money . How do u make money when u trade for one hour only . Fasinating .Good luck Trading and all the best. 

Regretfully i cannot make money trading for one hour 

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1 minute ago, bapu1 said:

Regretfully i cannot make money trading for one hour 

I guess it depends on what kind of trading you're doing -- it sounds as though you're doing Day trading,  but my timeframes are slower - position and swing trading

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Good luck on both counts - my only comment would be to always remember most of what is published out there is complete baloney, so bear that in mind when researching

Most fund managers fail to beat the Index they compete against and most trading strategies don't have a positive expectancy BUT all that being said you can still win, but very very few people who try do, there's always room in the 5% club though for new members

On the trading front - test test test trading methods, make sure they have a positive expectancy and just robotically trade, no emotion, nothing, trade appears take it, manage it totally robotically - the method needs to know when to take the trade, how to manage it and how to exit it with little thinking and absolutely no emotional thinking

 

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16 hours ago, jandj said:

I’ve just started using the IG platform and am having fun with it, after a week or so of playing with it.  I’ve opened two accounts and have just opened ten positions.

I’d thought as a COMPLETE newbie, I’d share my experiences here in “real time”, which will hopefully be amusing/informative for some of you.   I welcome comments, but no flames, please!

Background:

I inherited some money a couple of years ago and stuck it all in a savings account.   Fed up with the paltry interest rate, I decided to take a proportion of it and invest it in shares.

I set a conservative goal, which is to make 6% return in 12 months through a mixture of 50% investments and active 50% active trading.  On the latter, I’m prepared to risk 20%, hope to double (i.e., 5:1).

At the end of the 12 months, I’ll look at my two accounts’ performance and if necessary, revise my goals.

I have ten years’ experience working full-time in hedge fund risk, but very little of their trading strategies is relevant to me – I don’t neither the money nor the experience required to do anything like that.

The main indicators I look at are MA, volatility and volume.  Volatility also dictates my stops (so I can ride the troughs).  The limits are all set to 5 times the stop.

Here are the rules I set myself before starting:

  • Steer clear of low volume stocks.
  • No shorting (or equivalent).
  • Only trade stocks where I believe I understand the underlying market sector and think that it’s a growing one.
  • Try to trade more than one stock in a sector, or trade ETFs.
  • Turn every ****-up into a lesson.
  • Don’t get all “Rorschach” when looking at charts.
  • Listen to everyone and listen to no-one.
  • Trade no more than 1 hour a day.  Research no less than one hour a day.
  • Dampen the natural volatility in my mood fluctuations (less elation, less depression. – almost the definition of hedging)

 

Day 0:  I picked some stocks out of a hat (well, almost:   Two of them were tips from Motley Fool,  two were "pet" companies I believe in, which have been growing for years,  and the rest were tech stocks involved in areas that I believe will have a growing demand in the coming year.

Day 1:  A good day, I was .05% up in both accounts!  Multiply by 250 days in the fiscal year, (I’m not compounding) that’s 12.5 %!  Cool!

Lesson learned:  None.

 

Day2:   A bad day, I did the last of my weekly spread bets (which had a big spread), so I’m now a few hundred pounds down.   The Dow is down, everything is down.

Lessons I need to learn:

1. Patience.  Re-Read what I wrote down when I opened the position – the time frame for exit was months, not days or hours.

2. Don’t watch the weather, study the climate (I live in the UK, where weather-watching is a National trait).

3.  Don’t buy at the market.

Hi @jandj

Thank you for sharing this information and your insights are beneficial to help others as well.

All the best - MongiIG

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Day 3:   Down a lot on my spread betting account.    Position account doing OK.

I spent too much time looking at charts, revisiting the IG Academy course on candlestick patterns.  

I’m almost looking forward to hitting the stop on the two spread trades which have done really badly, so I can do a post-mortem.

The two trades I'm seriously down on are a UK and a US stock (price rise)

If I do hit the stop on the UK stock, I think it’s because I didn’t really have a good handle on the volatility.    This is a chart of the stock over the last week, with my stop line shown.

As you can see, I bought at the peak! 

There was a big buy on the left of the chart, followed by a similarly-sized sell a couple of days ago.   Somebody got their timing right!
Did they just look at the moving average crossovers?  It certainly looks like it.   Maybe the buy trade itself helped lift this (quite small) stock’s price.

I don’t know much about this company, it’s a medium-cap UK company in a sector I’m guessing will do well over the next year.
image.thumb.png.699f5981fc6e11fe786db359c9bb6ea2.png

The other spread bet I’m doing badly on is a US stock.   It’s pretty volatile but has been growing reasonably smoothly and steadily since inception in 2016.  It’s also in a sector I’m guessing will do well.
While watching it tank almost 3% today, I belatedly Googled it, and found an article from the beginning of August in Investor Observer saying it was overpriced, and definitely not a buy.   But its price has been rising steadily throughout August, so that can’t be the reason for its sudden drop today.

No lessons learned today, but if either of these trades gets closed by their stop,  I’ll be sure to try and find out what I could have done (if anything) to avoid the loss.
 

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A couple of things I could add: 

If you are learning don't go with 18 units per point like you showed us on that picture. Try the minium size bet and grasp your knowledge as you go. To prove that you can trade well you don't need a big size. 

Day trading is the best way to blow your account. If you are not ready to hold your position overnight think again why you entered on that trade in the first place. There are very few traders that can make day trading , and all of them made it after losing way too many times.

 

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Day 4:

Manually closed out the spread bet on the UK stock after stop reached.   The sell was not immediately automatically executed at the price by IG, presumably due to slippage.
In my demo account, I’d won the “same” bet, with the exactly the same conditions --- except the market value, and of course, the time that the bet was made.  It might seem obvious, I know, but to replicate my order correctly I should have at least set the price – otherwise it’s a different bet.  And I should have checked the charts more carefully too to see if the conditions had changed.

Maybe I’m a masochist, but I’m keeping the stock on my watchlist to see if I could have won with a more carefully considered bet.

Since opening the position, I found out that the stock seems to be popular with momentum traders, which I guess is what I was doing.   My reasons for the placing the bet were very simplistic:  It’s a medium cap company that is in a growing tech sector, and its stock value has been “steadily” rising.
I basically bet that it would continue to go up until it reaches a value of X, not in itself  a stupid bet to make.  Whether or not that bet proves right, my execution was very flawed, both in timing, and in setting the stop level.


Lessons learned:
•    Take into account the stock’s volatility carefully before setting stops/limits.
•    Time the order correctly and set a bid price.
•    Research the stock before placing any trade.   
•    Understand slippage – I got caught out by price gaps in this rather illiquid stock.
 
I’m a little confused (not to say nervous) about the US stock, which has clawed back most of yesterdays’ losses today:

I’m still holding on to the position, but might go against my rule, and sell out before the limit/stop – pleading naiveté as an excuse:
 
At the beginning of August, one of the company’s VP’s sold 2/3 of their shares.
Then on the 24th, the CFO and a VP sold 2/3 of their shares ($3,000,000 worth of shares shed in total).  
But the stock’s price rose considerably after this big sale, noticeable on the chart.  
Why?  

image.thumb.png.6aaca50628505fe78b6986a1604f3ffd.png

A third bet was on another US company, which, to look at its chart, is nothing special, but, like the others, is a tech company in a sector I have hopes for:

It provided me with the only good feelings I’ve had about my portfolio in the as couple of days, as my phone pinged me throughout yesterday and today that my trailing stop had been adjusted.
 

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32 minutes ago, jandj said:

At the beginning of August, one of the company’s VP’s sold 2/3 of their shares.
Then on the 24th, the CFO and a VP sold 2/3 of their shares ($3,000,000 worth of shares shed in total).  
But the stock’s price rose considerably after this big sale, noticeable on the chart.  
Why?


The short term stock price of a company doesnt not reflect the company's performance.
The best companies in the world can exceed all estimates, targets and expectations and the stock will still tank. The stock price reflects trader's sentiment. If enough people sell the stock it will go down regardless of how well the company is performing.

Using your example above, some traders might see that stock as a bargain. A high performance company who's stock price suddenly dropped. Long term, the traders will know if the company keeps its current path of high performance, the stock will eventually bounce back. the old quote goes: "If the business does well, the stock eventually follows."

Another quote that has also served me well (despite me trying to prove it wrong multiple times...):
"insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise."

After much back testing, you may find you will be far more successful buying when insiders buy compared to selling when insiders sell.

 

Best of luck 

Edited by Spook1304
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17 minutes ago, Spook1304 said:

 

 


"insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise."

 

 

Best of luck 

Ok,  Reuters news just appeared a few minutes ago,  the company are buying another (big company), so no wonder those guys sold :)

 

I closed the position (losing a few pounds) manually.   

 

Lesson learned:

 

Check for insider trading and steer clear of any where there are big sells  (I only do long positions)

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9 hours ago, jandj said:

Check for insider trading and steer clear of any where there are big sells

If you manage to check for insider trading you will be ahead of 90% of traders in the world. If that was possible at all :D, of course 

 

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Day 5:

 

Well, it’s been a week, I’m feeling a little more in control over things. 

 

My long portfolio is up, due to a combination of luck and (I like to think) some wise stock tips from Motely Fool and my own stock-picking instinct.

 

I messed up the Spread Betting account a little, but after selling out a couple of stocks at a big loss and small profit respectively, I’ve learned enough to give me confidence to place more spread bets on those same stocks, with a smarter execution.  And the spread account is now up decently too.   

 

Contrary to my initial rules,  I’ve tweaked one of the stops on one of the trades, changing it from trailing to a fixed loss of 20% of the stake, as I can see that the volatility is too high for me to be confident that it wont get suddenly closed.

 

 

I’ve been doing a lot of background reading about the rise in amateur trading.  This article from the FT was interesting : https://www.ft.com/content/7a91e3ea-b9ec-4611-9a03-a8dd3b8bddb5

 

My good friend Pete has been really sick with COVID the  past two weeks.  We normally speak on the phone every couple of days, but he was way too ill to do much more than post a couple of anxious-sounding texts the whole time.   A gambler by nature, at one point he gave himself 5 to 1 odds on surviving.  Fortunately he won that bet.   I finally got to speak to him yesterday, where (between coughing fits) he gave me the run-down on cryptocurrencies, which he’s very heavily invested in.   I’ve been thinking of buying some Ether (but only spending money I don’t mind losing completely).  I read a Goldman Sachs report from a few years back that suggested it was more future-proof than other Cryptos – and what with the current mad rush to buy non-fungible tokens, it seems like a reasonable cryptocurrency to invest in.

 

I have 50% of my funds still available to trade.  I’ll place a few more trades next week,  which will give me an opportunity to make a whole bunch  of new mistakes.  

 

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