SIUYA

sounds like you are on the right track. (except I think day trading ASX stocks is tough. Swing trading easier) I will tell you a story that should allay some fears about support and resistance and what the market is thinking (the point being nothing changes that much from my perspective) - MIM - ASX - mount Isa mining. for those old hands that remember that, it got taken over by Xstrata, and management did not object - RIGHT BEFORE THE BIGGEST MINING BOOM WE HAVE SEEN!. It was a gunna be stock. Management always said next year its gunna be better, etc; etc; etc. It was highly traded, highly liquid. Any way - at some stage in the mid 1990s there was a massive at the time OTC option position of about 49,000 options at a particular strike (49mil shares equivalent when it maybe traded 2-3mil a day). It was common knowledge, there was also a lot of ETOs around'the same levels. The first time it dropped to the "support "levels it bounced. Myself and a bunch of traders bought and made money. the second time everybody looked to so the same again. So there it was we all bought, all thinking this is easy money, big support, the market knew it etc; etc. Then one day, a few of us were discussing it, and some one said, "shouldn't it have bounced from here". This set off alarm bells with me thinking ÿes it should have but it didn't. I and a few others immediately dumped our longs, and a few guys went short. well support quickly broke. There was no one else left to buy the stock - we had all bought the first support, and thought it was a magical line. This was also backed up by fundamental information. etc;. Point being - I think you are on the right track. Understand support and resistance, understand how it fits in with your ideas of how the market works and the players (rightly or wrongly its all theory) and then think about whats happening AT THE TIME. things change. Even those at the coal face, creating the support sometimes believe their hype, and its only when you stop and combine the analysis that it makes sense. This was not about stops, about gunning for them, this was pure supply and demand, when there basically became no more demand. (Dont know if this helps but it was topical as I was discussing the MIM story with another guy last week)

currently as a WIP trying to automate this a little but generally what I do is much the same as you. 1) place order, get it to Break even quickly or exit as I am wrong. 2) Take a small profit on some (my guesstimate is always about 50%-66% - no reason for this number) at either a set target take profit level or just when I feel the move has had enough. 3) HOWEVER. On the remaining amount if the stop is at break even, I dont have a trailing stop OR a target...... its letting it ride. (this is the part of the automation I am working on, as you still need things in place to monitor and look after these runners)

screw millionaire....these guys are behind the times. the new word today thanks to China, the growing budget deficits and the real big boys in hedge funds is BILLIONAIRE. if you are not aiming for that then clearly the system just does not work. But no.... i dont know who John Thomas is.

True - I completely understood, but backtesting either for the 1980's or the last 6 months is still backward looking. You dont want to fall into the trap of using numbers to justify a viewpoint....such as currencies trend less than equities. thats all. For short term trend trading models, I have always wondered if the context of what is hot right now is a great way to look at it - ie; a volatility measure - however even a short term volatility measure is not necessarily a great indicator of what is trending. If you are really interested in a guy who does a lot of interesting number crunching for trend following (although its for long term stuff, so maybe not your bag) check out Au.Tra.Sy blog - Automated Trading System by Jez Liberty

i would say if you are wanting to put a spread on as a trade,..... then give it to the broker in its entirety.....mainly as legging it on can be tough and you are crossing two spreads to a market maker, whereas a spread may have a smaller bid offer differential, than legging it on. This is very different to taking an existing position and turning it into a spread. First and foremost if using options to trade direction, have the direction part already mapped out. If trading volatility, then its less an issue (but this is more for market makers, or more active participants)

First this is a very different proposition/question to the attributes or buying v selling an option and then the re-hedging. This is more money management and how/what to trade. Honestly I think trading options requires much more thought, more money and more planning than just straight directional trading. As there are many more possibilities, and scenarios to cover. As a result trying to apply the same money management ideas of % of equity and where to set stop losses...... does not necessarily work when it comes to options trading. (not to say it cant be done....but in my estimation its like trying to approach building a house with the wrong tools..... hard work) When it comes to options and buying them..... you have time decay AS WELL AS directional profit or loss, plus market maker spreads to contend with. So you can actually be right, but still loose or not make much. You can do many possibilities..... eg; buy a call as you are bullish. When you are right or wrong, you can exit the call, you can hedge the call in the underlying, you can hedge the call using other calls, or other puts. Your last choice to me makes the most sense. You have decided that the underlying is not doing what it should and hence you have exited the trade. From this work out what the options will be when you enter the trade, what they are likely to be when you may exit the trade, and from this determine how much you are willing to loose on the trade, and from this work out how many options to actually trade. (you may find this will not allow you to trade many options) Remember as well that options give increased leverage with potentially less exposure, and yet......its very easy to get carried away. (hence why I think trading options with a small amount of money can be very dangerous). Just this week I bought 10 calls at 21 cents in something that I think may go up. This gives me the effective exposure to 10,000 shares (in Australia each contract covers 1000 shares). For me this is a $2100 bet.... and my plan on this bet is that if i loose the lot so be it. Now I could have bought many more options and decided to cut it if I lost the $2100. But this is different to how I wanted to play this. This does not form a fixed % of my equity....its just a view. its just an amount I am willing to risk. If I thought the stock was no longer going up.....I could sell out the options, OR I could short the stock effectively making it a put. But I choose to trade less options, and choose to say its a binary bet - I am right or wrong. As mentioned - options open up many mnay more choices other than just buy or sell.

trend trading is more about money management, participation and having a diversified portfolio. You never know when stocks will trend more than currencies. Just because stocks have not trended as much over the last ten years means little. Look at 1982-2000. Looking backwards to find the right combination of trending instruments is curve fitting and just that - looking backward.

the question was asked. "There needs to be a mechanism, either automated or human to move the price based on the input." This was followed up with "What sets the current bid ask" etc; etc; Markets work and work efficiently when you have free and open access, lots of competition, transparency and willing participants. (Plus other stuff) Basically markets these days are much more open than they were 10 years ago. More participants, more access, better technology, more transparency. this is the mechanism that allows people to assess, prices, participate, move prices and orders.The platforms that provide the market place, that provide access to the market place a vital. Once you have people who can access a market place, and opposing view points..... you have the mechanism for a market. Even if its betting on a football game. there are buyers and sellers, and the price is the point they will exchange bets. There is no global conspiracy of market makers, there is no cartel of banks .... there are just participants. the market does not care who you are or what you think. (yes, yes there is but no there is is not ) Completely different to the ideas of value.

first learn this relationship....and all other derivations of it..... there are quite a few. Long Call + short put = Long underlying Once you start hedging with the underlying, you are generally just creating another synthetic option. If you are short volatility and selling options..... then you may not be reducing your risk with a hedge....you have not stopped the loss. All you have done is change the risk profile and created a new option. There is a lot more to options trading than just buying and selling. Personally I have always been a long vol option trader - a buyer. The guys I know who have been short vol - sellers of options have all either blown up or changed their ways over many years. (unless they are institutionalised)

Often this is an early warning sign to cut a position...... you dont need to wait until your stop is hit. I have often waited around too long for something to happen when clearly the trade is not doing what I anticipated it to do......

thats all you need.

you are young go for it. You can always get a job again, and you will recover from it. Its not as stressful as divorce or moving house and plenty of people do that time and time again. (if you were older +40 with a family etc; maybe the advice would be different)

its always darkest before the dawn. Or its always darkest before its pitch black. Seems like you need time off and some fresh perspective.

thankyou. that gave me tears of laughter. I come from a farming background and for years my families farming friends said i was a gambler, and that only farmers etc; were productive. Until I started asking them.... "so you plough $500,000 into the ground every year and then you cross your fingers you get the right weather conditions right throughout the growing and harvesting seasons, in the end hoping that the end world commodity prices are worth your while to harvest--- all of which are entirely out of your control, and you have no exit plan, liquidity or diversification...... you tell me who the gambler is"

personally - I know a lot of traders. But I dont know if they started successfully or had to work at it. A lot were thrown in the deep in and either managed to make money or did not. The one thing I do know is that at some stage every single one of them had a bad period of loosing money, and the only ones that really made it had both a passion for it and were always questioning themselves. So maybe its luck of the draw for when you start, or you are just born with certain attributes that help you become successful? Otherwise..... discussion forums etc. They are just another source of education/entertainment/discussion/inspiration/thought provocation. Sometimes the individuals circumstances change, or they just get bored (most likely). Often what I think works in some circumstances does not in others so you can actually have a multitude of answers all equally correct dependent on the perspective of the time, person and place. I dont believe everything I read in a science journal so the internet certainly is not going to trump that. There is one philosophy I have recently had re-inforced in my general personal life and that is "sh.t happens" so you either do you you dont things...... the universe does not care.....but i would rather do

Too much Maths can blind you to the realities of the market....LTCM, Var proponents. An interest and a basic understanding in numbers is all thats really required. There is more than one way to skin a cat. As for the fund managers who use a lot of math...... do they or is that just part of their marketing strategy????? (food for thought)

Troymaster - maybe a trojan horse??? "Let’s assume I’m able to invest 100 grants. As I do understand from my research 30% revenue is a good year for a day trader." No 30% per year is a fantastic return from some of the best in the business eg; Soros, Buffett As Kiwi mentioned they have issues such as slippage. Day traders and Swing traders who are good can return more. I know of a few people regularly in excess of 100-200%.. There problem is scale. But as you can live off 30,000 a year you should be ok. "As a very good poker player you can assume to make 6digit $. At least 100k a year if you are working hard. If this calculation is right it’s not worth to even try to be day trader." Ask yourself.....what does a very good poker player make in comparison to a very good trader. Then ask yourself what does an average poker player make in comparison to an average trader.

I dont trade FX options.... never really got round to it. But I would suggest getting an INDEPENDENT options model so you know what parameters go into it. Purely and simply as its not an exchange traded market with competition. Or compare against the equivalent futures options.

86834 - you make some good points, while intraday trend trading via breakouts may be having a tough time at the moment, longer term trend traders just recently are having a pretty good time of it. One fund I have invested in was up 7.82% for October. So clearly there are trends. I think the point that there are different types of traders, styles and methods should not be lost in the discussion. While everything will have its own good times and bad times. With regards this thread......you need to match stops with the system or style to be adopted, and then IMHO stops dont necessarily need to be as systemised as many might think. I for one will always prefer to adopt a system that makes me easy money over hard money, even if it supposedly takes no real skill.

Then yes, the way you describe it regards the brokerage, it sounds a reasonable deal.....I would not imagine anyone would have a problem with such deals. Especially if the brokerage is a minimum payment to cover the costs of the desks and they are offsetting. The other deals whereby they charge you brokerage on top of a desk, and the brokerage is exorbitant, then thats different. however.... If they are actually putting up 9 for every ten as opposed to you losing your money first, and then you are out the door, then this is the difference between exposure and leverage. As a simple example - a trader puts up $10,000, and gets access to 10x leverage. The trader looses, $15,000. What happens there? I would suggest that if the trader looses his 10, and then owes 5, then if there are any profits, they would also keep 100% of those.....this I call a broker if the trader looses his 10, the prop shop looses 5 and wears it then a profit split is also only fair. (what those percentages may be I dont know what the industry norm is). This is more a prop shop. This is my point..... who actually wears the risk? compared to the rewards.Trading someones levergae, as opposed to trading their capital are two different things. From purely a definition point of view, to me a broker (or clearer) is NOT a prop shop but can still provide all the leverage required. Except they dont take a percentage of the profits. It all of course boils down to the traders doing their homework, but we all know there are enough unscrupulous people out there happy to take others money without offering much. I saw and heard some stuff the other day at a seminar that made my skin crawl, while a few other peoples eyes lit up with the dollar signs they were promised. (There are a lot of different ways to do things and different business models, and I am first to admit I do take a rather harsher skeptical line, but thats what discussions are for )

yes i can see that, that is why all along I have said, distinguish between what is a prop shop v what is a broker, or a scam. I understand what it costs to set up, pay people and take risks. This is something I have done. Telling people to get real does not help, implying I have socialist tendencies just means you cant read and are getting all emotional. :helloooo: Alerting people to the realities that not all proposed prop shops are worth it and that if you are taking all the risks, putting all the money up and paying extra fees to someone just for a desk then you should probably stop. when it comes to leverage - there are a lot of options around. If you are trading futures or FX this is easy. Even if you are trading stocks, its available at reasonable rates. If they offer proper training, not just commission gathering expertise in a churn and burn mentality then great.....most dont. "if a business earns X dollars of net profit per employee, do you think, they keep a small piece and divide the net profit up and give it to their employees because they are the ones who did all the work?" You answered the crux of it - look at WHO takes the risk. If you are the trader and you take the risk and someone provides a little bit of training and a desk, but takes most of the profits then what more do I need to say.

and your broker and the exchanges charge you nothing? You need to look at what the most cost effective solution is in each case. Sometimes the market makers spread may not be that large, but if it is then yes, you may save on this spread. I also thought in this example that you are long the option and looking to sell it out. Most market making firms will do this at parity (or maybe a small spread) if not maybe I should look to start becoming a market maker again.!! You dont necessarily have to hit the market spread, you can put a limit order in. People who are short an option will buy an ITM option back. There are plenty of people who cannot fund the actual purchase of the shares. you can do either solution, so long as you are able to via funding the trade and then yes pick the most cost effective solution.

Yes. if they are a true prop shop and not a broker. It all depends on what you wish to define as a prop shop, what they offer and what they promise. etc (if you read the thread) And in terms of capitalistic nature of markets..... doesnt it have something to do with those who take risk receive the rewards, as opposed to those who take no risks, and expect others to pay them for convenience? Imagine if no employer took on new apprentices to train then it would not take long for the business to die. Imagine if those same businesses, charged their employees for their desk etc. For me its all about who takes on the risks, and who reaps the rewards.... that for me is getting real!

for stocks.....depending on the market type - bull/bear etc. Answers are generally.... 1) 2-3 trades per day (this may mean 1 trade per day in 2-3 different stocks) 2 ) no specific target, such as 5 x risk. It depends on the pattern I am looking at....eg; sometimes you look at levels, other times you get lucky and a move occurs quickly, other times you just want to let it run until it tells you to get out. 3) see answer 2....generally 3-4 days. Though may be less than a day or may be months.

from his article... "In today’s market, traders now have to be both right about direction and have conviction in the direction at the same time." so whats new?