Easy Cash Loans

Posts Tagged ‘trading help’

Trying to figure out the best stop loss when day trading is always a hard thing, even for more experienced traders. One thing is most certain, those traders that consistently do not use stop loss orders face almost a 100% chance of losing a significant amount of money, if not all of it. Even using stops, if they are inapropriate, will result in net losses no matter how good the stock pick is. In addition, adding positions before market moving news events occurs can assure increased volatility and increased odds of stopping out.

The major thing to concentrate on is the current market conditions - this is very important. Not what the Dow Jones Average is doing, it is what many stocks are doing overall and how they are trading. What is the general volatility level for the day, is stuff trading slow and steady or are they whipping up and down quickly on a slight move in the futures market? This makes a large difference in not only the stop placement, but in the overall risk level for the trade. Most people assess risk by the amount one can lose when day trading or swing trading. What most people fail to think about is the actual odds of that loss happening.

While there is no easy formula to figure out the odds, if you watch the pattern of behavior of how similar stocks are trading, you can get a pretty good idea. If current conditions are calm, you can usually use a smaller stop amount and still have decent oddsit will not get hit. When more volitile conditions are present, using a smaller stop is a really bad idea because of the significantly higher odds that even a smaller than normal oscillation in price will hit your stop.

The way you figure the odds in a stop happening when day trading is somewhat straightforward. Look at the average range over the last 20 minutes or so, the high to the low area of the bars. Do not pick the most calm period of time, as this tends to not stay constant. If current times are super calm, go back on the chart to a more volitile period for the day (or another day) and then figure the range. It does not have to be exact, an approximation is fine. Once you have measured this range, this becomes your maximum risk.

What we want to do is to lower this max amount to a lesser level. This can be accomplished in 2 different ways. The first way is to study the pattern of trading behavior for that stock locallly when it reaches a prior high level - does it normally fade back or does it have momentum and push through? If it starts to push the last few times it reached a high turning point, then it is probably ok to buy the stock on strength. If it tends to fade or try to sell, better off to see it push, then put your order 1/4 of the range you computed earlier, lower than the high its at now. So if the range was 1.00, and the stock was at 40 now, you would put your order at 39.75 to put on a long. You will most likely miss some trades doing it this way, but have to ignore the urge to chase the prices. If a similar pattern is occurring on a lot of other stocks (in general) you have to be extra careful.

The second way to lower the risk is to split your order into 2 parts. So if your trade size you want is 500 shares, just buy 200 shares now. Wait until it pushes a decent amount up (meaning it has pushed enought that it has moved past the fade the breakout move area), then look to add the other 300 on a 5 or 10c dip. Move your stop price up higher .45 now (figuring you have a 1.00 stop to start) on the whole thing. The other choice if the price tends to fade after pushing higher is to buy 200 shares now and then place the balance of your order .25 above your stop (assuming it is 1.00). The max stop remains the same on all shares. The difference here is if market conditions get poor for going long when day trading for a period of time, you are going to lose a lot more averaging when its selling because you will get filled on the add, then stopout 2 minutes later on all of it.

The way around this is to simply cut back size - when the market gets unpredictable, play ONLY 1/2 normal size or less until it starts to act more predictably. The name of the game is preservation of capital first and foremost (hence the stops), but second its to avoid easy loss situations. While is is very difficult to actually tell that trading conditions are improving without actually trading, it is a very good idea to trade with less shares until you visibly see conditions look better over time.

Technorati Tags: day trading, day trading robot, daytrading, investing, learn to trade, stock market, stock trading, stocks, trading, trading help, trading rules

Once someone has mastered the basics of trading, the biggest hurdle is actually finding good ideas to watch for a trade.  Some people subscribe to chat rooms with other traders, some people like to watch real time news, and others like to program computers to scan the market or use a day trading robot to help them find ideas in real time to make money.

One key advantage to a day trading robot is its ability to be unbiased and apply the same set of rules every time.  The real key is finding a day trading robot that is reliable in its stock picks and is easy to use.This is of course no easy feat, because there are a ton of impostors and stuff that used to work but now is of little use because the market changed but the robot was not able to adapt.

One key component of any day trading robot that should be essential is the ability to find stuff in real time, but give you enough time to actually act on the information it provides.  It does no good to use a day trading robot that scalps something so fast that you cannot even get an order in should you choose to follow what it is doing.You can always choose to let a day trading robot have control of your account, but a lot of traders are uncomfortable with this type of situation and like to keep control.  In addition, there are always nuances that occur each trading day that a computer program cannot take into account but a human trader can.

Any trader looking to make use of a day trading robot to find ideas should realize the limitiations and use it as a great tool to find additional ideas to trade.It is fantasy land to expect a trading robot to be right 90-95% of the time, or for it to make 40% every month in your account.  I can tell you 100% anyone who has such a tool would never sell it or lease it out - they would be living on a private island off the wealth it creates daily.In order to get the maximum benefit from using a day trading robot, you need to have realistic expectations for performance.

Technorati Tags: day trading, day trading robot, daytrading, investing, learn to trade, stock market, stock trading, stocks, trading, trading help, trading rules