Dow Jones Industrial Average IndexEducation
Trading Major Markets using Stops and Margin: Risk/Reward Ratios
Trading Major Markets 1 of 2
You've probably already learned a lot through trading Bitcoin.
Those skill-sets are super scalable.
Often am in too much of a hurry to cover other markets to have time to lay out stops and risk reward ratios - hoping that you're experienced enough to work them out for yourself when I miss doing them- which will be quite often in fast markets.
There just isn't time except at weekends to cover things from a newbie's perspective.
This analysis is meant to be for more experienced traders really.
But for newer traders this is one way of trading technical signals. It isn't fool-proof. No system is.
But it works well across multiple markets if used with discipline, and without emotion.
But please don't believe mere words.
If it interests you please test it first.
20 times.
Calibrate your rifle sights/stops as per the pinned message at top of crypto pages and test tolerance levels of stops given.
It will never be perfect though.
We don't have to be either.
Just close enough...
Wave Trading and Wave Counting
Don't really see where Elliott 'waves' figure in the great scheme of things or at the micro level either.
Would like to. But have little evidence usually.
But If Elliott floats your boat and you can trade off it that's great. Please share if so ; )
In the meantime smaller time scale signals are there to be traded. And if we trade them with stops and a system that works more often than not we can make good returns on half and more of the positive trades and yet limit losses on the ones that don't work out as planned.
And by trading smaller moves we become part of and merge into the longer term. It's more fun to ride the smaller waves - they too become part of the bigger wave anyway.
And if we can see a good Elliott wave amongst the noise all the better. If so, share it dude!
Until then, if you can SEE that the stop is very close or ideally that price is right on it (limit down as with FB last week for example) then it's a SPECULATIVE buy with a stop close underneath the level given.
It's 'speculative' because we don't know that this will be the bottom.
In this respect 'breakouts', though still speculative, are less so than buying lows. We all want to do the latter: the buy low sell high mantra didn't make it to market mantra-hood by coincidence.
But lows can be more difficult to spot than breakouts, which no one misses really.
For example with the Dow recently it was around 20 to 50 points of stop if you were buying the dips, (see global markets link at top of main page)
Some will just leave orders in the market with a decent stop - say if looking to buy the Dow within 10 or 15 points of a given level (cannot expect to be bang on every day, you know that already) - they leave the order to strike or not and then use a stop at least 20 lower on Dow and maybe 50 at most. And some stick in a limit order too at the same time as the stop.
Sometimes it works well.
Sometimes it never gets struck.
And sometimes it's a big fail and we get stopped out for 20-50 points on the Dow.
It takles a lot of the emotion out of the equation. Not all of it. But a lot of it.
And if you can work out the RISK in points you can then work out potential rewards too.
Then it becomes possible to divide your total bank into 20 - so 20k total bank for ease of explanation = 20 trades or bets of $1000 each at a maximum - for this is effectively what we are doing... Betting that our call is better than the market's call at that moment in time compared to some future moment in time.
We don't have to be right much more than 50% of the time though we all want to be.
If we can be stoical/philosophical about losses and wins and tread the line without thinking either we're too clever or too stupid we stand a better chance of handling the inevitable losses when they come.
To think you're Billy-whizz of the markets and then discover you're not is way more disheartening than
never thinking that crap in the first place...
Part 2next
You've probably already learned a lot through trading Bitcoin.
Those skill-sets are super scalable.
Often am in too much of a hurry to cover other markets to have time to lay out stops and risk reward ratios - hoping that you're experienced enough to work them out for yourself when I miss doing them- which will be quite often in fast markets.
There just isn't time except at weekends to cover things from a newbie's perspective.
This analysis is meant to be for more experienced traders really.
But for newer traders this is one way of trading technical signals. It isn't fool-proof. No system is.
But it works well across multiple markets if used with discipline, and without emotion.
But please don't believe mere words.
If it interests you please test it first.
20 times.
Calibrate your rifle sights/stops as per the pinned message at top of crypto pages and test tolerance levels of stops given.
It will never be perfect though.
We don't have to be either.
Just close enough...
Wave Trading and Wave Counting
Don't really see where Elliott 'waves' figure in the great scheme of things or at the micro level either.
Would like to. But have little evidence usually.
But If Elliott floats your boat and you can trade off it that's great. Please share if so ; )
In the meantime smaller time scale signals are there to be traded. And if we trade them with stops and a system that works more often than not we can make good returns on half and more of the positive trades and yet limit losses on the ones that don't work out as planned.
And by trading smaller moves we become part of and merge into the longer term. It's more fun to ride the smaller waves - they too become part of the bigger wave anyway.
And if we can see a good Elliott wave amongst the noise all the better. If so, share it dude!
Until then, if you can SEE that the stop is very close or ideally that price is right on it (limit down as with FB last week for example) then it's a SPECULATIVE buy with a stop close underneath the level given.
It's 'speculative' because we don't know that this will be the bottom.
In this respect 'breakouts', though still speculative, are less so than buying lows. We all want to do the latter: the buy low sell high mantra didn't make it to market mantra-hood by coincidence.
But lows can be more difficult to spot than breakouts, which no one misses really.
For example with the Dow recently it was around 20 to 50 points of stop if you were buying the dips, (see global markets link at top of main page)
Some will just leave orders in the market with a decent stop - say if looking to buy the Dow within 10 or 15 points of a given level (cannot expect to be bang on every day, you know that already) - they leave the order to strike or not and then use a stop at least 20 lower on Dow and maybe 50 at most. And some stick in a limit order too at the same time as the stop.
Sometimes it works well.
Sometimes it never gets struck.
And sometimes it's a big fail and we get stopped out for 20-50 points on the Dow.
It takles a lot of the emotion out of the equation. Not all of it. But a lot of it.
And if you can work out the RISK in points you can then work out potential rewards too.
Then it becomes possible to divide your total bank into 20 - so 20k total bank for ease of explanation = 20 trades or bets of $1000 each at a maximum - for this is effectively what we are doing... Betting that our call is better than the market's call at that moment in time compared to some future moment in time.
We don't have to be right much more than 50% of the time though we all want to be.
If we can be stoical/philosophical about losses and wins and tread the line without thinking either we're too clever or too stupid we stand a better chance of handling the inevitable losses when they come.
To think you're Billy-whizz of the markets and then discover you're not is way more disheartening than
never thinking that crap in the first place...
Part 2next
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