Ended the week with my forex account around $130, went short USD/CHF near the end of the day. I plan on on holding this trade for longer than I have been. The main problem I am having with currency is when trading off the 3 hour charts, I have no problem picking winners but I am usually asleep or working when they happen. So I am switching to daily charts and increasing my holding period. I am taking smaller positions so I can use bigger stops. We'll see how it goes. I am really getting interested in stocks. I think in a few weeks I will open a 2k margin account with pointdirex. I will most likely position trade, holding for a few days to a few weeks. I really want to swing trade, but the PDT rule will make it hard. That rule is stupid. It forces people like me into futures where they can really lose their shirt a lot quicker. I have been reading Market Wizards and have really picked up on some great stuff in it. It is really making me realize how close I am to success. All I am have been lacking is good money management but all that is changing. Good trading this week.
I've been having a grand old time tonight scalping around my USD/CHF short, picked up a whole ten bucks tonight! YEEHAW! I'm always mantaining my base short position and then trading tiny lots around it. Good fun. I'm developing my stock trading method. I am going to swing trade. I don't like the PDT rule but it only limits me to 4 daytrades in a rolling 5 day period. If I get to 3 I will just stop entering new positions until I am in the clear. No big deal I guess. My method will go long and short. Basically I scan for stocks that are doing interesting stuff. I look for volume spikes, new highs, that sort of thing. When I find some charts that perk my interest I will monitor them for low risk high reward entries. I will go short, but I prefer to do it after the top of a ralley followed by a pullback. This is because I want to short when it will hurt the most people and give me the quickest profits possible. Stuff I look for at the top of ralleys are lower highs, double tops, the classic patterns. Key reversal bars/candlestick patterns are also nice. I will avoid shorting breakouts to the dowside out of congestion because I want to avoid being caught in short squeezes or going agaist the long term trend. So I will short on pullbacks. Going long I will enter mainly on pullbacks, but possibly on breakouts as long as the market stays strong. The lower the risk the better. I will not risk more than 2.5% of my account on any one trade. Period. This isn't much on a 2k account, but if I have to trade 10 shares at a time so be it. I am going to make this my rule now, in preperation for when I am managing a decent sized account I will always have a stop set before I enter a trade and this will determine if the trade is worthwhile, and how many shares I will trade. I am not going to set profit targets. This will depend on the chart. I will take likely resistance zones into account when deciding whether or not the trade is worthwhile. If a trade is really looking good I might hold it for a week or two. My trades will begin on the weekly chart, and entries made off the daily. I might end up as more of a position trader but with my work schedule I can't monitor hourly charts. Right now here are some charts that have caught my interest. I don't have a directional bias on most of them because they could go either way. I will wait until it is completely obvious which way they are going. Many of them are approaching former highs so a reversal or breakout is due. Look at the weekly charts to see what I am interested in. There are tons of stocks doing interesting stuff, these are just some examples. IPXL CMOS AHS NCN RSYS OK This is where I am at in my stock strategy right now, will add to it as I play around with it over the next few weeks. I plan on opening the account in 2 weeks to a month. With my new job I should be able to contribute $200-600 a month so the account should move along fairly quickly. I finished reading market wizards and started reading Reminisces of A Stock Operator tonight. It is fantastic. I love the parts about him taking the bucket shops for a couple g's a pop. It sounds like the markets were pretty wild back then. To think we complain about scams today!
The most important part of swing trading is knowing how to take profits. Thats what you should really be focusing on. In your post you barely touch on it. I have been swing trading for many years.. and realized that the exit is what seperates wheat from the chaff. For a beginner you are best off scalling out of your position as profits are being made. --MIKE
Mike, I have thought a lot about exits. That was a long post so I kind of skimmed over some stuff. Here is my basic exit strategy. I will identify likely resistance points based on past action and take partial to full profits there. This point must be at least 2x risk. I may hold for more if I think it has more, but I will use trailing stops beyond this point. I haven't thought much about what kind of trailing stop. If you have any suggestions on exits(or anything else) they would be greatly appreciated. Thanks Bagger
Before you place the trade.. you need a specific profit taking strategy... you can't just say.. I'll see what happens.. because in reality you are just winging the most important part of trading which is actually ringing the cash register... Personally... I like to take scale out of my profits when I have them ( i usually do it discretionary depeding on market and sector performance) .. and usually trail atleast 1/4 of the position and let it run.. --MIKE
A good trail is using something like an ATR based trail or volatility based... for more inf do a search here on ET. A simple trail is something like a 2 bar low/high.. there are tons of methods.. --MIKE
OK so when would you begin taking profits? Say for example you have a stop of 2.5%. I'll look into the trailing stop methods.
For starters... assuming you had a stop loss of $1 on the trade.. u should look to begin locking in a piece of the profits when you are in profit of around $1. Basically you begin locking in profits when you profits exceed your risk. You can do thousands of testing on whether to scale out.. or just to take profits as a whole... at the end they all have benefits and negatives. The truth is no method is better. The right method is the one that your feel psychologically comfortable executing. Make sure the profit strategy matches the estimated duration of your planned holding time... --MIKE
Got out of my USD/CHF short. Looked at a longer chart and realized I probably was shorting on a pullback. Broke even after my adventures in scalping last night. Opened new short positions in AUD/USD and EUR/USD. These are both entries on pullbacks that look like they are resuming their downtrend. Ideally I will hold these for a few days to a few weeks. The problem on the last trade was 1. I had my chart to enlarged and 2. I am too dumb to notice this right away.