Hello all, new to the forum. I've been reading around and there seems to be some good common sense here with strong opinions on display but usually without the flaming so I'm hoping for some sensible answers. I have a few questions related to what I am doing right and wrong with regards to my approach to trading. I've been trading around 8 years on and off, always part time while my job paid the bills until recently when I have had some time off work to day trade. With the accumulated experience I have gained so far over the years I have got to the point where I am making money daily trading the DAX. I can usually make 20 to 60 points a day on average with some outlying good days and some rarer bad days. Cutting to the chase... my first question is... is there really anything wrong with so called bucket shop brokers if you are actually making money trading through them? I am in the UK and so use a spread betting broker with Metatrader 4. Now I know a lot of people will probably scoff at that right from the start but if I'm making a profit does it really matter who I trade through? Can you give me any suggestions as to how to get set up a little more professionally? Who should I be trading through? Is it better to trade futures through a proper futures broker? If so what platform/broker should I consider? I pay 0.9 (so 9 ticks) spread which is probably quite high, I wonder if I could get better with a different broker? I trade at £5 per point but will often add on so I have multiple trades open if I catch a good momentum move. Is that possible with a futures broker, or what's the minimum position size? My second question is what sort of stats should I keep if any? I have been calculating my ave win/loss %, my ave APPT, ratios of winners to losers, largest win to largest loss ratio. Is this any help in the long run or is it all just about making money and these figures are pointless? Thanks for considering the above and I appreciate any sensible replies
You already know it matters in a big way. I will check back to see what are the better places to trade through as I know there will be a few good suggestions.
I say this kindly: after eight years of trading, you know the answers, and if not, time to hit the books. Cheers!
It depends what you mean by "wrong". It obviously makes sense to minimise your dealing costs. Because it directly affects "how much profit". I'll scoff at MT4, which I think is trash, awful, clunky, unreliable and displays many indicators incorrectly. But I won't scoff at spreadbetting, if you're UK-resident, because you're not paying a penny in income-tax or capital gains tax on your profits. If you're making profit regularly, and your spreadbetting company isn't making life difficult for you, or closing your account (and I'm not for a moment suggesting that all of them would, because although they're strictly speaking "counterparty", some automatically lay off their own net liabilities and don't therefore care which clients win/lose as they're just pocketing the spread), then you may be doing the right thing. If you're not really making regular income from it, or if for any other reason the tax situation isn't relevant to your circumstances, then you should switch to a futures broker, if you possibly can, in my opinion. You'll save money. What?! On what instrument?! It sounds appallingly high! The minimum position size is 1 lot/contract. For ES (e-mini S&P), for example, that's going to be $12.50 per tick, which is $50 per point. For NQ (e-mini Nasdaq), it's $5 per tick, which is $20 per point. What are you actually trading?
Yes, that's what I have a feeling of. I've always used mt4 as I have always found it easier and I can code trade management "expert advisors" to manage my trades, limited to applying an immediate initial stop on market orders at the moment. Interesting to hear it doesn't display some indicators properly. I don't use indicators at the moment but have done in the past. Spread betting seems a good idea and I am a UK tax payer so it does apply to me. Are all spread betting providers by definition bad though? I am making money every day, usually 100 GBP to 300 GBP although I made 1500 GBP yesterday as I happened to be 15 GBP short when DAX did that fast move down the page. Also managed to get out of most of it fairly near the bottom I'm trading DAX cfd through ADS Securities, only after 8 am UK time. That's a 9 tick spread but I pay no commission on that after. I could possibly step up to 10 or 20 Euros per point if I had to if that gets me a substantially better deal. Do you have any figures for DAX? What position size and spread/commission? Thanks for taking the time to answer, I do appreciate it.
No. A lot of "forum information" about spreadbetting comprises a mixture of prejudice, out-of-date information and lack of awareness about how the industry's changed, in my opinion. The days of poor regulation and very wide spreads are over. (At least, they are for what I trade. But a 9-tick spread on the Dax does sound pretty bad!). LCG (formerly "Capital Spreads") is ok. Then spreadbetting may actually be good for you. You're saving a lot of tax. I wouldn't dream, myself, of spreadbetting the Dax using an EA, not even with someone else's money, but that's another matter altogether - if you're making money from it, you're making money from it! Dax futures are Eurex, I think? Not CME, anyway - so a little outside my vocabulary. Sorry. I do trade index futures, but not the Dax. The Nasdaq is volatile enough for me. Commissions are probably going to be between $4 and $5 per round-trip (opening and closing a position). http://www.eurexchange.com/exchange-en/products/idx/dax/Mini-DAX--Futures/2208132
In case anyone is interested in my "system" such as it is... I buy at support when the momentum is up, sell at resistance when the momentum is down. Let my winners run and cut my losses short. Support and resistance to me consists of "25 levels" which I have marked with an indicator, just draws a line every 25 points, so 500,525,550, etc. Pivot points seem to work quite while on DAX. Then I draw trendlines on confirmed swing points. The trendlines seem to be really well followed on this instrument. I will also mark any swing points that don't correspond with any of the above horizontal s/r. I will trade holds of s/r and I will trade touches of the s/r. If it goes straight through I will close straight away for a few points loss. If it does hold I'll move the stop up pretty tight, it either holds and makes me money or I'm out. I will trade breakouts. Quite often I will trade a s/r hold and then a breakout as well so I get 2 positions running. My target is generally the next s/r level but if it's a quiet day I will take some profit quickly. If not much is happening and it's trading well around s/r I'm happy to take a couple of points profit, it all adds up. I prefer to take trades when there is not much s/r in the way for quite a way, I'll expect those to run a bit further. If I catch one of those wild moves the DAX loves to put in I'll hold it until price comes back past the last s/r broken. My average loss is only ever about 17 or 18 GBP or 3.5 points. My average win varies a lot but seems to average somewhere in the low 30's GBP so 6 to 7 points. My strike rate averages just over 40%. It works ok for me.
Ok, thanks very much for your help. The ea simply puts a stop loss onto an order I've just opened with a market order (or works for pending orders too, basically any trade without a stop loss gets one applied. By the way I run this on a VPS so if I take a market order on my laptop and then for some reason the internet goes down, does happen, then at least I know I have a stop loss on!).