How To Make The Most Of A Automated Trade Idea

Posted on May 20, 2008
Filed Under Trading Education | Leave a Comment

Most people who are in the market spend about 80% of their time trying to find an idea, rather than actually figuring out how to implement a automated trade idea. While selection is key, going in at the wrong time, or before an expected news event that may trigger additional volatility is asking for trouble.

Even if you are not a super active trader, the timing aspect is often overlooked and can be a real drag on net returns over the years if not considered. Now if you are a long term investor, it becomes less of an issue - however I know very few people, even if they plan on holding the investment for years, that would like to see it sell 3-5%% down right after purchase. After all, in hindsight, had you waited a bit you could have gotten it on sale - but some of this part is unavoidable. One must balance the risk of missing the trade vs. going in with bad timing which can exacerbate any losses taken should the trade not work out. We will concentrate on what is avoidable to help with timing, whether its an investment or a robot trading idea.

Anytime you are looking to invest or trade, whether long term or a automated trade idea, the timing of WHEN to go in is important. Some stocks on an average day can have a 5 or 7% range between the highest price and the lowest price, if they are volatile. Even non volatile names can be so sporadically. So some attention needs to be paid about when to actually go in and purchase the shares you want.

Where you think a stock might eventually go should not really affect you here. Too many people say ‘Well the stock is 40 here today, but in 2 days I think it will be 45 dollars so I don’t care how I enter my automated trade idea.’ or ‘I think it will be 25 points higher in a year or 2, so who cares?’ Well if you think about it, if you regularly give the market even 1% per trade, figure about how much that adds up to over the years. After all, would you pay a broker 1% or 2% commission per trade? Years ago maybe, these days that is almost unheard of anywhere.

So what is needed is a basic frame of reference to try to time the entry. Usually the best method is splitting the order so as to not entirely miss it (it does happen occasionally if one is perfect :) ). To do a decent job of entry, you need to look at where the stock has been in the last 1 or 2 hours, and where it is versus the last 2 hours of the prior day. If it is at the high range, the only justification for entering would be a high expectation that it would continue and you would miss it. Often this is hard to judge, so this is where splitting the order can come in handy. Enter half now, and then put more in 1 or 2% lower (this is assuming you are not in a robot trading idea, which is entirely different). This way if you are right, and the stock does sell off, you now own the stock at a net better price. If the price takes off, you have not entirely missed it. One thing with this method is you will sometimes miss adding as many shares as you wanted. Usually chasing it and adding higher is NOT a good idea.

Now if the stock is in the lower 1/3 of the range for the last 1-2 hours and its near the low of the prior day its probably ok to add the full position if its a somewhat longer term trade. The only exception to this would be the last 45 minutes. Usually its not advisable to add stocks breaking or near the lows in the last 45 minutes as they have a tendency to go lower the next am. Of course this depends on the issue looked at and market conditions, but in general this holds.

Share This

Currency Prices And Currency Trading

Posted on May 18, 2008
Filed Under Forex | Leave a Comment

Patience in Forex trades is important
Smart traders follow their system and wait for good opportunities to It’s not necessary to have positions open at all times. Don’t trade just for the sake of trading. You’ll jump into many more bad trades than good ones.
stocks bonds,
Any smart trader knows that in order to be successful they must
be able to analyze the market and predict price movement. This is
true whether you trade in stocks, bonds, commodities, currency,
or any other for of security.

Analysis can be done in two different ways: fundamental analysis
and technical analysis.

Technical analysis is the study of prices. The goal is to analyze
the history of price movement in an effort to predict future
prices.

Fundamental analysis is the study of a nation’s overall economic
health. I like to think of this as “Big Picture” analysis. The idea is that the strength of a nation’s economy will affect the supply and demand for its currency, which will in turn affect the price of the currency.
forex
For example, let’s assume that the US economy is in a major upswing.
Since the economy is strong, the value of the dollar will be expected
to rise and currency traders will invest heavily in the dollar. This
bullish behavior becomes a self-fulfilling prophecy and the dollar
rises in value.

That’s a pretty simple concept, but judging the health of a nation’s
economy is no easy task. There are many factors to consider, and two
traders may look at the same figures and interpret the data differently.

Fundamental analysts look at various economic indicators for signs of
an economies strength. Some of the indicators they analyze are the
interest rate, unemployment rate, consumer price index, and gross
domestic product (GDP).

These reports are released regularly by various government agencies and
non-government entities. You should find the latest schedule of upcoming
releases and put them on your calendar. Keep an eye on them for a few
months and see what effect they have on currency prices.

One thing to keep in mind: it is not always the numbers contained in a
report that have the greatest impact, but rather the relation of the
numbers compared to what was forecasted.

In other words, a rise in interest rates may not have a significant
impact if forecasters were expecting it. But if they were expecting
interest rates to remain steady and there was an unexpected increase,
there may be a large impact on currency prices.

A major disadvantage of fundamental analysis is that it can be a little
too “big picture”. It is great for predicting overall economic growth
and price changes, but it doesn’t offer enough details to target specific
entry and exit points. This is where technical analysis comes in.

Fundamental Analysis vs Technical Analysis

When it comes to analyzing the forex market, there
are two basic schools of thought. One is called
fundamental analysis, which is the study of a
nation’s overall economy. Proponents of this
big-picture view believe that price trends can be
predicted by analyzing various economic indicators
which give an overall picture of an economy’s
health.

The other school of thought is called technical
analysis. The core belief behind technical analysis
is that prices tend to follow patterns, and that by
analyzing past price patterns one can predict what
the price will be in the future.

But which type is better?

Well, to be honest neither. You need to combine both
types of analysis to become a successful trader.
Limiting yourself to only one or the other is a recipe
for disaster.

Why? Because by using only one method you’re only
looking at half of the picture. Let me use an example
to make my point.

Let’s say you’re a strict technical analyst and you have
no use for fundamental analysis. “What do I need to look
at economic indicators for,” you say. “I have my price
charts and they shall never let me down!”

As you study your charts, you begin to see an opportunity
forming. You’ve got 3 or 4 indicators showing that a huge
breakout is about to occur. The US dollar is about to go
on a rampage and rush to get in early. So you make the
trade, sit back, put your feet, and wait for the price
to soar.

But then something funny happens. The price drops 50 pips!

What the heck happened??

In disgust, you walk away from your computer and flip on the
television just in time to see the financial report. It turns
out that the latest Unemployment numbers were just released
and the number is much higher than expected. At the same time,
one of the world’s largest corporations announced that their
earnings were well under forecasted amounts, and they predicted
sales would continue to be sluggish through the next quarter.

Those two variables through a major monkey wrench in the price
rally you predicted. If only you had mixed a little fundamental
analysis in with all of those price charts you were busy
studying you may have seen this one coming.
fundamental analysis,
Of course, using fundamental analysis alone is not the solution.
The big-picture view of fundamental analysis is great at
identifying general trends in price movement, but it does
not give a detailed enough look to provide entry and exit
points. Sure you may know that the Swiss franc is due for
a price increase, but how much? When should you buy and then
when should you sell?

Only by incorporating both methods into your trading system
do you have a chance to be a successful trader.

Share This

Forex Market And Automated Systems

Posted on May 16, 2008
Filed Under Forex | Leave a Comment

The technology of today has changed our jobs and lives in many ways. For those trading in Forex market, there have been several advancements in technology recently that can have a large impact on the outcome of our investments.

For example, automated trading software. This can benefit traders and investors at all levels. Automated forex software systems now offer more than information on specific foreign currencies- after applying the setup parameters, they actually have the ability to execute trades without human intervention.

They do offer charts and graphs for those investors that want to continue trading manually, however, their design is to automate the trading process. By doing so, investors can attend to other business. This is great for those that invest in the Forex markets as a secondary business.

Share This

Keep Your Shirt On In The Forex Market

Posted on May 16, 2008
Filed Under Forex | Leave a Comment

If you aspire to be full-time Forex trader, you should have certain habits and mindset in place. For one, you should focus on getting more profitable trades than losing trades so that you can make an overall profit. However this is not usually done simply because people kept making the same mistakes again and again. Until they learn to change their habits, they are going to keep losing money.

One Forex trading habit that can make you lose your money is putting real money onto a new forex trading strategy that they have just learned. That should be a big NO-NO. Remember to go for virtual cash first and apply what you have learned. Prove to yourself that your strategy works before you throw in your hard earned money into it. Most Forex professionals suggest that you should go for at least 4 weeks of profitable trades first.

Share This

« go back — keep looking »

Recently


Categories


Archives

Close
E-mail It