There was a thread on 'Making Money' a while back, but the thread dissolved as the opening op was banned from fccuk ...

I have a valid interest in the stock markets myself, and over the past few years have been heavily investing in many areas with mixed success ... So I'm hoping that 2012 is going to be a better year!

Therefore I thought it was a good time at the start of 2012 to see what other fccuk members situation is on the current climate & what there thoughts are on the current economy?

Myself I'll open by saying from what I've learnt that 2012 could be a bearish / sideways year for many markets, that's despite the bullish start to the year for many markets!
Are there any keen traders out there? 2011 was very volatile in many ways, how did everyone else find the markets?

I usually have some sort of involvement with the LSE, although results have been very disappointing in the past year. You can divide my activities into two categories:

1. The FTSE 100, where I always end up in profit. It's simply a matter of getting in when you think the prices are in a trough, and then waiting for them to come out of it. It's not an exact science, and you can find yourself in debt for a long time. I made about fifteen percent over the year.

2. Other stocks: I stupidly went with the euphoria with BKIR, and lost all the money. i still have most of the shares, but they are worth next to nothing. I won't be doing that again.

So my experience is that if you stick to (1) you are likely to make some sort of gains over the year. But you need a lot of patience to wait for entry and exit points. Don't buy until everyone else is panicking.

Used to do a bit of dealing 10 years ago but nothing recently. Did just buy some Rockhopper shares last week. Have a look at the news today Let's see what happens.

I think there are certain sectors which are going to do very well in the medium term. Research is need I think...

This is the inevitable old chestnut. Does research do any good?

Answer: No, because other investors have already done it, at great expense, so all known factors already 'priced in'.

This is not necessarily a universal truth, but it is enough to put me off even trying. I just assume there will be ups and downs, gauge the general economic sentiment ( fairly flat at the moment) and wait for a trough.

This chart shows you the limit of my analysis:



100-day moving average, 10-day moving average, and spot price. A trough occurs when the spot price drops below the other two. Sorry, you can't open it, because it requires sign-in.

Are you using weekly or daily charts? Not able to see your screen shot.
Out of interest have you a trade running on the FTSE100 at the moment?
I can see your method for entry, but you don't stay how you exit?



I've attached a weekly chart with your 100/10 EMA's but as I can see your entry points if you used through 2008 could have lost you quite a lump of money?

In May 2010, and Aug 2011 these were positive depending on your exit method?

Daily charts, or even intraday charts. I just buy and sell whenever the current price is right.

Yes, if you use my method you can get locked in for extended periods. That happened over 2007-8, but I stayed in and eventually got back into profit. I don't believe in stop-losses in the FTSE 100, as they just chip away at your capital to no advantage. Stop-losses and over-trading are your worst enemies.

I buy and sell on pragmatic observations. If the price dips significantly below the averages, I buy, if it rises significantly above the averages, I sell. The background indicator is just the general economic outlook at the time. Apart from that, it's just a matter of waiting.

I can see your in trades for a long length of time!
For your style of trading, you could try using the 8/21 EMA as on the attached image?



As you can see I've marked where the 8/21 EMA cross, Green/Orange for Buy/Sell & as you can see on the daily chart over time this has good results? Ok so your not getting the full extent of the peaks & troughs, but for long term trading it works?

I don't tend to trade the FTSE100 direct, I analyses the current state of the FTSE then trade on the shares within the FTSE, I'm looking for 5% movement, then I'm out of the trade

Redline - I have been doing this for a few months now. With mixed results i have tried many different styles. I would consider myself as day trader scalper in and out within mins or seconds using the 1 min chart.

I generally trade the ftse 100 before the S&P opens.

I could do with a little advice my current system combines MACD 3,10,14 and ADX period 6. What i look for the ADX decides to go long or short , the macd decides when to buy or sell when it crosses the line. My stop is 4 pips but is really 3 as your buying price has 1 pip cost. My limit is 2 pips.

I have tried to add stochastics into the scene but they dont work to well.

Is there any advice you could give me or any alterations you would do to my system?

Thanks.

Yes, that seems fine. There is no exact science to all of this. If you select your entry point fairly wisely and then go for 5% that works. Sometimes I cash in after 30 minutes, sometimes after two years. It all works in the end.

If you use stops you will lose money, unless they are just trailing stops once you are in profit.

I'm hardly an active investor , but I stuck a little cash away in 2 investment trusts ten years ago. With reinvested dividends and capital growth the value has more than doubled.... not too bad, and better than a deposit account .

Yes, that's a sensible approach - too sensible for some!

So-called 'systems' that are supposed to make you money are generally compared with your method. If they do better than that they are said to work.

No-one has actually come up with evidence that any such system works. They often seem to work, but that turns out to be just a stroke of luck.

Why don't they work?

Basically, because the known facts about a stock are already built in to the price. Investment companies do all the spade work on this, so there is nothing left for us to do. So from that position, any future movement is more or less unpredictable.

If you add to that the losses incurred through triggered stop-losses, and also trading fees, you are on to a loser. You will sometimes win, of course, but on average you will lose, so in that sense the method doesn't work.

Well, doesn't work, except that there is just one 'strategy' that does: The one I use (obviously, otherwise I wouldn't be using it). It relies on market sentiment, really, which goes through panic / euphoria cycles. Get in when you see the market is panicking. Get out when everyone is piling in (or to be more accurate, has piled in) on renewed confidence.

jonnybgt1759 - Firstly I'm not a processional trader & only do as a hoby when I can, but I have been studying heavy for the past few years?
I do have a good friend who does it professionally to the point where he has now retired & lives from his day trading!

Firstly I would say that there is no exact method or system to work to? as mentioned many systems are available to buy but these are very flawed in many ways & will give you various success rates? Even processional traders are happy with around a 30% success rate? Although my friend is not happy with anything less than 80% ..

All indicators are 'lagging' indicators so you wont' find a magic one to look forward for you ?
Using the MACD/ADX is working for you, so why not just stick with that & look for ways to tweak your setup?
I would say that you are working very hard for 2 pips?
I'm guessing your going in heavy at £10+ a pip?

I look at the daily charts, looking for bullish / bearish reversals, Set my stop / limit at the previous days high / low then sit back & if I've calculated correctly the trade runs successfully, if not my stop is hit & I lose a small amount that I was prepared to lose . At £1 pip I'm looking for 3-400 pips of movement over a few days?



I'm not saying your wrong , but I would argue that stops are very important?
I would call your style of trading 'Gambling'? You jump in the trade on a 'hunch', when price falls you just sit back & wait days, weeks, months or even years on the hope that your trade comes back into the black!

I would say that you have been lucky so far & the FTSE has always risen back from your original level?
I know from experience & have lost alot of money on one trade from NOT using a stop? This was in 2010 when I had a trade running on the DOW, started a short trade at just over 10k, the DOW then rose for the next 12 months to over 12k, I was on a year contract that expired because as you I was keeping my fingers crossed that my initial mistake would come good?

Nearly two years on the DOW is still over 12k & if I still had that trade running I would still be at a loss & keeping my fingers crossed that one day it would come good? I can guarantee as you say that give it another 6 months to a year that trade would have corrected itself?

Lesson learnt I now always use 'STOPS' ...

What a legend you friend is lol thats what i am trying to achieve one day



Yeah thats about right 10 per pip. What i find is when you tweak your rules change and then your disipline goes out of the window.

I may try to work over the longer time frames. What signals to you use to go for bull or bear?

I use the DTosc which isn't really available on any of the standard platforms?
But it's a mix of the Stoch & RSI, Using the Stoch or the MACD can give similar results but the DTosc seems more reliable?

One Book I would suggest reading is: -
High Probabilty Trading Stratagies


Also if your interested I can pop a Link to a blog that friend has started, its only in the early stages, but it will build with time!

Yeah that would be great!

Im thinking about changing strategy to daily charts its less time looking at graphs when your supposed to be working lol

So why do people say a stock is undervalued? I appreciate that you could say that they are incorrect/lucky in their assumption, but it appears to be true in some circumstances. Certain sectors will outperform targets in years to come.

Following on from my post above, I did some research into the Oil/drilling sector and specifically the Falklands, concentrating down the general consensus from both analysts and the layman investor. It appears to me that the sector as a whole is undervalued given the increase in the value of crude as well as other factors. The sector doesn't appear to have caught up with the facts?

I may be completely wrong but I have invested in the companies that are mining/drilling in the area. I appreciate that I think I have 'got in at the right time', but the sector appears to be strengthening considerably. Take Argos as an example- since I bought last week they have doubled in value for various reasons. The other companies have seen significant increases also. I effectively have a stake in much of the Falklands mining and so believe have reduced the risk of large losses (unless the Argentinians invade ).

It looks like Rockhopper will now taken over or collaborate with a partner. This has caused prices to rise by 20% this week, but the writing was on the wall a few weeks before that?

Don't get me wrong, I don't think I'm the next Warren Buffet. However reading various sites, there is a lot of information to be collated and understood that appears to have not been taken into account by the professionals. I'm also surprised by the amount of market manipulation. Naive maybe?

As a side point, it appears that stocks can often be influenced massively by human nature

Let's see what happens. I might be eating my words

I agree that research can be a valuable asset when looking for potential stocks? If you have the time to spare it is a great way, but I prefer to update my charts for 20-30mins of an evening or early morning before the markets open, place the trades & sit back & relax or sigh if your stops hit ...



Yes you wouldn't believe how much time I've wasted at work staring at 2,3,5,10 min charts waiting for the entry exit points! Now I just check position first thing and leave it to its own

I'll reply to you this once, and then I am out of here. I can't comment on your friend. There is no information to go on. He was lucky, perhaps (just as you say I have been). In order of your comments:

The luck involved for me has consisted solely in the tendency of the FTSE to rise over the years, and my willingness to wait for a selling point. No hunches in sight. If you go short you blow that one advantage at a stroke. You are betting on a market dropping when its tendency over the long term is to rise. You are inviting a permanent lock-in. If you buy into a 12-month contract and are therefore forced to buy at a particular time, then you are the one who is gambling. I didn't recommend going short.

Do I possess the knowledge ... etc? Obviously not, but the one or two which permanently die lose me less than I would have lost by repeatedly having 10% stop-losses triggered - usually unnecessarily, since the price usually recovers again. You don't put all your money into one stock at a time. Obviously.These stop-losses are almost a guarantee to lose money over the long term.

Why are stocks rated as 'oversold', or 'undervalued'? Because the investors consulted consider that they are worth more than the current price. If most investors agreed with that, the price would rise. To see how reliable these opinions are, you need to analyse their overall success rate.

Apart from all that, so you think that even though the huge investment companies have tried and tested every conceivable 'system', none of which has proven effective, they still regard a modest 20% p.a. as a respectable outcome, but you have thought up a better system which will strip them of their investments.

Good luck.

I don't recall saying anything along the lines of 'Having thought up a better system'??
This was the whole point in starting the thread to gauge opinions from other forum members & in turn exchange views?

I can see that you are very fixed in your ways & happy to wait years for your investments to grow or return?
That suits you? but myself & many others would like our money to work harder!
Returns of 30%+ per year are easily achievable.

Enforcer - You are right in what you are saying if either the amount in the account is huge say 50k and you buy small amounts of contracts. It could be a year before you cash in but you would never lose.

In the real world traders tend to be looking for profit quicker and higher risk reward ratio so a stop loss is a must for any trader looking to make high reward per pound spent.


Redline - On your system do you look for oversold or overbaught on the ftse100 before looking at your trading stock to be overs, overb in essense to both be the same?

I always used to only trade indices ftse,dax and s&p and occasionaly Apple.

I now will be looking away from scalping and moving to the dailys with individual stocks what ones do you recomend in your experience?

Thanks.

jonnybgt1759 - I'm looking at several methods, but basically Yes my trading plan is looking for the FTSE to be in the OB / OS zone, then similarly look at the constituents within the FTSE to find shares that match the OS / OB position of the FTSE, as after all it is these which drive the indices itself?

I don't have any specific favorites within the FTSE, but I just run a scan to find potential trades?
Although you do start to get a feel for a market if you trade often.

Similarly I also look at the dow, s&p, and forex pairs looking for dual time frame (weekly/Daily) bearish/bullish reversals.

Hope that makes sense?

Yeah im going to give that a go with my current indicators, they seem to work ok having backtested them with various stocks.

Do you plan to do this as your main source of income one day ?

And also in the real world, most of them lose all their money. It would be nice if there were a system of trading that produced a reliable rate of return, but there isn't. If there had been, everyone would have been on it, and everyone would be making a profit, thus cancelling out the benefit of the system; there would be no losers to fund the winnings. Short term prices are unpredictable.

Let's say you have a system which indicates a sell at +10% and a stop at - 10%. Using a stop loss means that even disregarding trading fees you need to reach your sell-point more often than you trigger your stop. If the short-term price movements are unpredictable, how are you going to do that? No-one has found a reliable way.

Over what period of time did you back-test them, and did you deduct the trading fees for every trade? Was the resultant profit then better than the FTSE's growth over the period?

Back tested over six months on daily seems good using macd/stoch trend then setting up the stop each day at high or low to hold down profit. I dont pay trading fees I use CFD's to trade with Intertrader with 1 pip costs.

The profit varied stock to stock. I have now included some bollinger bands to give a little extra support and resistance.

I am still unsure of the moving averages and how they play a part on the daily?

If you don't pay fees that would be a significant help.I was just interested in the nett overall percentage profit using your approach. That would mean across all stocks you traded over the period.

It is very easy to form unwarranted generalisations from selective results. To be honest with oneself, it is necessary to be coldly objective and see what overall profit a method produces over the long-term.

Just in case you too misread me as being 'fixed in my ways', maybe I should elaborate on my conclusions, after thirty years of trying to work out a winning formula.

1. Short term movements are completely unpredictable. There are articles (eg) on Wikipedia that discuss this at length. What happens tomorrow is unpredictable.

2. Therefore, initial stop-losses are triggered as often as not - guaranteeing that they are the wrong strategy

3. Time is your friend. Even though short-term movements are unpredictable, you can still make a profit if you are prepared to buy when the stock is in a trough (relative to MAs) and then WAIT until you are sufficiently in profit to sell. Sometimes this will be an hour, other times a year. You can't predict how long, because the prices are unpredictable, but eventually you will usually get your sell point.

So in short, the only way to profit from an unpredictable market is to have time on your side. Unlike your competing investors, have the patience to wait for the sell point. You will then be one of the winners, amidst a field of short-term losers. It's true. I can't put it any clearer than that.

BTW, using a bit of circumspect thinking here:

The internet is full of people offering trading systems. How many of those do you think are actually expecting you to benefit?

None: If they had a profitable system they would be in there full-time making money for themselves. They wouldn't be giving it to you.

So they are teaching you nothing. In fact, they are generally misleading you into losing money, so that they can gain from your loss. One key tool in their armoury is the 'stop-loss myth'.

No-one is obliged to agree with me, but I am certainly not fixed in my ways, and I have certainly analysed this entire subject to death. The closed-minded among us are those who are unwilling to see the reality I have just described.

I agree 100% that there are lots of people that are running the scams with their promise of huge profit.

Their is one guy however that i have learned most of but currently do not use his services as he trades american stocks only and hosts daily live radio station 'day trading radio' he has uploaded more than a thousand videos free to all via you tube on strategy. You can also become a member on his show for a small fee each month enabling you to see all his live trades you could also join free for a month with a small payment after intial setup you can cancel any time you like . The problem for me 2.30pm to to 9pm does not suite my life i wish there was a uk version.



That is the way you should trade get a CFD account your fee is 1 pip to the broker rather than a £10 per trade deal?

I currently use Intertrader after searching through them all they are the best avoid plus 500 as they are the worst.


Redline - Do you know of day trader rockstar ie ( day trading radio ) if so what are your views?

Fancy that!

Seek not advice from the rich; they have no desire to share it with you.