We have lots of experienced traders on MoneyAM who would be glad to help if you have any trading questions.

Zoltar - each to his own....

I've put a lot of thought into this over the years, and have come up with the following:-

Gausie's Trading Paradigm

Indicators, be they technical, chart, fundamental or even (dare I say) astrological are, IMHO, a very small part of trading strategy. All they do is give you an objective means of entering a position and building a plan. By making it objective they ought to help to remove the emotion from trading.

In my opinion, there are three (and only three) things that matter:-

1) Understanding and application of support and resistance
2) Understanding and application of money management
3) A good relationship with lady luck

Fail on any one of these and you're done for. Succeed with all three and you've got it cracked.

A lot of traders will tell you that the only three things that matter are discipline, discipline and discipline. They're right in that it's very important, but they can't explain how some undisciplined traders are lucky enough to succeed, whilst other very disciplined traders still fail. I categorise discipline within money management.

As an exercise, try scoring yourself out of 20 for each of the first two, and out of 60 for the third. The result is your long term likelihood of winning, expressed as a percentage.

If you're incredibly lucky (60%), you dont need either of the first two skills - you are a Trading God and have beaten the 50/50 threshhold. If you're incredibly unlucky (0%) it doesnt matter how skilled you are. Even if you hold the title 'Emeritus Professor of Money Management and Support/Resistance' at the university of international bourses, you still wont get over 40% so you're going to do your dough.

If, like most of us, you have average luck (30%) you're still going to lose money without a good grounding in at least one of the other two facets and an elementary understanding of the other. If you're an expert in one of the two then you've reached the bar (30% + 20% = 50%) but you're not over it.

You need at least a basic understanding of the missing piece to clear the hurdle.

A trader maximises his luck by having a thorough understanding of support, resistance and money management. This is the best a trader can strive for. Even the best traders won't win every trade - to do so they'd have to be incredibly lucky. But they'll cut losses early and they'll let their winners run. And they'll come out on top in the long run.

Gausie

As Gausies says Support and Resistance are King for me as well. Add to this only trading with the overall market direction. If the the market is rising than you will have 90% buyers if its falling 90% sellers.
If you want a long position
1 Buy when the market sentiment is good and the FTSE rising.
2 Make sure the Share is in an upward channel but not approaching a resistance point.
3 Make sure the sector is in favour.

This should give you a 80% hit rate. Fail in any of these and your average will come down markedly.

Also as G says you need lady luck on your side!
D.

Great response, guys.
I also think risk/reward is critical. It's all very well buying at support, but there needs to be enough potential profit in a trade to make risking a loss worthwhile.
One of my own failings is that I tend to exit too quickly if support is broken, only to see it turn straight around and go up strongly without me on board, a la WMH over the last few days. Maybe setting stops too tight, but things can often move quickly against you, so striking the right balance is tricky.
ZOLTAR

One other thing, Croc.
When is the FTSE rising, and when is it NOT rising.
What is best to determine this?
Just because it is not rising, doesnt mean it is falling and vice versa. My experience of support and resistance on indices is that it often breaks, returns and breaks again. It can do this several times before establishing direction, by which time it has cried wolf too often to trade.
ZOLTAR

Zoltar - risk/reward is part of money management.

A lot of traders use their stop loss and target (via support and resistance) to determine a) whether the trade is worthwhile and b) how to size their position.

Re: your second point, what constitutes broken resistance/support? This is part of understanding support and resistance.

For example, an indecisive intraday break of support is often a day traders amber light for a long and a position traders green light for a long. Only a decisive break signals the short.

A position trader will want to see a *close* below support followed by an open below support and a falling intraday price to signal a decisive break - so what if he misses the first 2 or 3p? He's unlikely to be whipsawed as described above.

A daytrader will check the strength of the buy side on L2 before making a call. If there's strength below the current price he'll go long looking for an intraday return back through support and a move towards a close above support. He's looking for the whipsaw as a chance to scalp a few.

Gausie

Gausie
trying to track you down to find an answer. what did you do to upset that old goat OLDOLIE?

Didn't know I'd upset him.

But I wasn't too happy when he made threats of physical violence to a friend of mine.

His recent posts show him to be a skilled trader with a valid and interesting point of view. I guess back then he was finding his feet and possibly felt he had something to prove.

Strange chap. But water under the bridge as far as I'm concerned.

A few questions related to CFD/sb spreads...also the term 'nibbling'

Take BT for example...


BT SET PRICE shows:180.5-181 What is your definition of nibbling, my understanding would be to Buy (or go long CFD spread given maybe 181/181.5, sell at 186 or around that mark...? i.e for small gains and keep buying as the price rises...(or falls, then u go short...nibbling)

For most tight spreaded FTSE stocks what would you say is correct/fair quote for (BT as example again) CFD spread given by Broker, using example above, would be a 'quarter' or 'half' point above quoted SETS price? I presume it would be a quarter, of course If I am not happy with spread I can just say..No..

I find nibbling risk high at this stage of trading, just my opinion, I know traders do that all the time, some very very successfully I might add, need to gain a lot more experience to do that kind of trading consistently...but I am learning, and want to be confident that the trade I make is my best...by that I mean at least a higher % of success, than failure..

I suppose CFD's can work out very well if u are looking for 3-10%+, going short/long on larger more liquid stocks, say FTSE 100 and some some 250 stocks.

Many Thanks always...

Jules99.

ta Gausie
was reading a thread about this site on adfn,which has been frozen, he slagged you off big time.
now trashing threads esp tad fbb.

tx for reply

oooer! whats the url?

Zoltar Have a look at the chart on th Traders Thread as a good example
Micro trends during the day do break to often and are not worth trading. But the longer term are very reliable as can be seen in the chart.
What do you think?
D.

Jules99
BT is a tracker and so has a very strong correlation to the daily movements of the FTSE
If you go long BT the majority of the time you are going long on the UK market.
If you trade a few times a day have a look at GNI where you can trade either side of the order book
This means if BT is 185 Bid 186.5 offer you can place an order to buy at the 185 or sell at 186.5p.
Effectively being in profit as soon as your order is filled less your dealings costs. This can be a big advantage!
D.

Could anyone guide me to a readable source for option trading and where is perhaps the better traders to deal with or website? thx

Gausie
thought id saved it but now missing.
it was a thread about MAM.
will persevere
rod

Welcome to the LSE Casino All!!!

Sod The Data and all that!!

From a Day Traders point of view BTW!!

:-)

Jeff

Thanks for that Croc...

p.s I heard or read Barclays do CFD's too now...Can anyone confirm and is the service any good?


Ta.
Jules99.

TTT

Gausie/Croc.
Great stuff on this thread.
One thing which I think I asked wrong before; How is the best way to tell if the market is trending or in a trading range? Does it even matter? If you have correctly identified support, and your exit point is close, you should still be able to put the trade on. However, if a stock has fallen to support because the trend is down the trade should not be taken, but if it has fallen because we are range bound, it should be.
Also, and this could be a big topic, how can a small guy using a home PC with sharescope EOD hope to develop and back test a system? If, like me, you still have to do that old fashioned thing called 'work', you are not likely to have an army of subordinates to write tailor made software and spend thousands of man hours in system development. Any back testing the small guy does is likely to be of too small a size to be complete, as the data sample will often all be within a bull or bear run. Also, it will contain plenty of errors, omit times when signals are generated and then quickly nullified, and could even be based on erroneous assumptions and principles. Without being able to test lots of data the small guy's 'system' is surely doomed before the first trade is made. Tight money management and all the discipline in the world won't help you if your trading system is flawed.
Thanks Guys
ZOLTAR

Zoltar
I believe you can backtest your TA trading ideas with Updata
http://www.updata.co.uk/TA/simulator&Community.asp
D.

Curses! I thought the Crocodile had asked a question. I was all set to give him an answer ;-)