Académique Documents
Professionnel Documents
Culture Documents
ABOUT INTERTRADER.COM
InterTrader.com provides a suite of products and tools to help you back your
judgement in the financial markets. InterTrader.coms aims are simple: to make the
markets accessible to all, to make trading affordable and to provide a service that
you can trust.
We offer both spread betting and CFD trading, providing fast and efficient
execution on a huge range of global markets. With InterTrader.com you can take
your own position on anything from stock indices and forex to commodities, oil and
metals to UK, US and international equities.
InterTrader.com is also committed to providing free news, research and charting
software to all our clients, along with training for all levels of expertise. Quite simply
InterTrader.com aims to make available the best-value trading package around.
Copyright InterTrader.com, 2011
All rights reserved
The views and comments in this guide are not the views of InterTrader.com. The
provision of this information should not be construed in any circumstances as a
recommendation or solicitation to buy or sell any security or financial instrument.
Spread betting and CFD trading carry a high level of risk to your capital and can
result in losses that exceed your initial deposit. They may not be suitable for
everyone, so please ensure that you fully understand the risks involved.
InterTrader.com is a trading name of London Capital Group Ltd (LCG) which
is registered in England and Wales under registered number 3218125. LCG is
authorised and regulated by the Financial Conduct Authority. Registered address:
2nd Floor, 6 Devonshire Square, London, EC2M 4AB.
Trading at the top: trading tips and strategies from a professional trader
TOM HOUGAARD
CONSULTING ANALYST, INTERTRADER.COM
2.
3.
4.
5.
2.
3.
4.
5.
6.
7.
Part 1.
Tips for better trading
RULE 1:
In a losing game such as trading, assume you are wrong until the market proves
you are right. Positions established must be reduced and removed until or unless
the market proves the position correct.
Why is rule one so hard to implement? The answer is that 98 per cent of all traders
trade to be right. The rest trade the markets to make money. The fear of being
wrong is more often than not a greater motivator than the fear of losing money. Be
conscious of it when you are trading.
RULE 2:
Press your winners without exception. By incorporating rule two in your game
plan from the start, you will be eliminating the desire to be proud when the market
moves in your direction, and to take profits to show you are right. Traders love to
be right. This is your enemy to love to be right. Your motivation must be to love to
do the right thing.
When you think you are right in the market, this is just the beginning of your trade
not the time to take your profits to say to the world, See, I was right! Who really
cares if you were right? You will become the best trader you can be by being wrong
small, not right small! Get that in your mind now. You are going to have to press
your winners if you really consider yourself to have the ability to make a living or
extra income from trading. Otherwise, face the truth that you are only playing to
break even. The money will follow the correct action.
BOOK NO. 1
Technical Analysis of Stock Trends by Robert Edwards and John Magee. This will
cover 95 per cent of your trading education. It covers everything you would want to
know and it will cost you 23. Although concerned with stocks it is fully applicable
to trading FX, futures and any other asset class.
BOOK NO. 2
High Performance Trading by Steve Ward. This is a complete psychological
infrastructure of trading, dealing with everything you need in order to trade for a
living. It will cost you 19.
And that is all you need to purchase for now. The rest you can find on the internet
for free. In Google you will need to search for pattern recognition so you know
what patterns to look for. You need to search for candle chart patterns so
you understand price action. Finally, you can consider joining a bulletin board
where experienced traders post their trades. You can learn a lot from that alone.
InterTrader.com also frequently runs webcasts where experienced traders talk
about specialist topics.
Once you have studied the material, you are ready to trade with a minute amount.
Open an account with InterTrader.com, either a demo or a real one and get tucked
in. There is no better practice than doing. Reading about it is fine, but you will learn
far more from actually trading and keeping a trade log.
STEP 1:
Your first duty every morning is to check the calendar for economic news. Stick it
on your screen so you dont forget.
STEP 2:
I dont anticipate what the news will be. I am too stupid. Instead I put my chart on
one-minute mode. Whichever way the market breaks after the news is released is
the direction I want to trade.
STEP 3:
Once news is out and the direction has been set, I do my very best to get into
the market on any kind of retracement against the news spike. It helps to have
watched the market 10 hours a day for a few years. You get to understand price
action.
STEP 4:
I dont look for a big move. If I can pick up 10-15 pips I will take it. My studies have
shown conclusively that although there is no guarantee that the direction of the
news spike will last for long, the market in question will almost 80 per cent of the
time do a retest of the low it made on the news spike.
TWO EXAMPLES
23 February: The MPC minutes are released. Cable spikes violently higher. After
one minute I see a 20 point retracement. I buy it. I wait almost 10 minutes. Nothing
happens. I get out for a small (but annoying) 10 pip loss. The market continues
lower for the next hour.
25 February: The GDP numbers are released. I dont even register the number.
Price is my God. Sterling-dollar spikes lower. I wait for a 20 pip retracement against
the spike. I enter, with a 20 point stop. I take a handful of deep breaths. I am out,
30 pips richer.
The principle is always the same: wait for direction, enter on a retracement, and
dont be (too) greedy.
market continues in one direction all day. This point was aired by others I met in
the pit. If a good trend was developing intraday, these guys would press it for all it
was worth, irrespective of who was on the other side of the trade. They were never
concerned about whether the market technicals were overbought or oversold. The
only thing they had in mind was to press it as high or as low as they could before
the bell rang.
Part 2.
Trading Strategies
Clem Chambers, the brilliant head of ADVFN and even more brilliant technical
analyst, taught me the interplay between the two stock indices and how stocks are
executed in block trades using volume-weighted average price (VWAP). I realised
that there is a statistical correlation between the two stock indices significant
enough to bet on.
I began to explore how to trade the two against each other in a straight arbitrage
strategy, and came up with the idea that if the two diverged by more than 40 points
from the previous nights close, I should short the one that was strong, and buy the
one that was weak.
Take 9 March 2011 as a good example. The DAX closed the night before at 7164.
The FTSE closed at 5974. Both indices were down about three to four points on
the day. During trading on 9 March the DAX and the FTSE diverged by more than
49 index points: the DAX was up 53 points while at the same time the FTSE was
up only four points on the day.
So I shorted the DAX and bought the FTSE in equal amounts. The DAX closed at
7131. The FTSE closed at 5937. The spread between the two indices had gone
from 1243 points during the day to 1194 points at the close. Although I did not
capture all the 49 points on the table, it serves to illustrate the strategy well.
Now, lets deal with what can go wrong? In one sentence: where is your stoploss? The answer is: you cant have a normal stop-loss. You have to use a
monetary stop-loss, and you have to be there to watch the screen. In that sense, it
is more suited to the short-term traders of the City and beyond.
EXAMPLE:
On 15 March 2011 euro-dollar made a low at midnight at $1.3920. However the
trend was up on my 30-minute chart. At 8.30am the euro dipped below $1.3920 by
about 10 points. It closed below $1.3920 too but, on the very next 30-minute bar,
the euro closed back above $1.3920. That is my signal to buy euro-dollar, with a
stop-loss below $1.3920.
The technique stems from the observation that even in a trending market you will
often find that price dips below a previous low, only to immediately resume its trend
higher. All I attempt to do is to trade in the direction of the trend defined by the
moving average. I reverse the instruction above for selling short.
the four main currencies, while the yen was the weakest against them. So naturally
I was looking for opportunities to buy euro-yen all day. The non-farm payroll
numbers made it a difficult trading day, but nevertheless in my live trading room I
raked in 30-40 points in euro-yen alone. It is a simple analytical framework and it
only takes 15 minutes to do in the morning.
EXAMPLE:
The overnight high was 117.40 and the low was 116.80. Around 8.30am, the
market traded below 116.80, down to 116.60. It then began to rally. The entry
price is 116.60 + 62 per cent of 117.40 minus 116.60 = 117.10.
The stop is below the old low and the target is double of what the stop is, in
this case 100 points. If the target has not been reached by 4pm, I will close the
position, unless I am in profit, in which case I will move the stop-loss to breakeven,
and potentially close some of the position, depending on how much I am up. I use
a bit of discretion when it comes to the end of the day.
came as no surprise to me that the man who made his millions selling forecasts to
people actually made his money from a remarkably simple trading method.
My friend and trading partner David Paul once spent a whole summer at the British
Library, researching past wheat and beans prices, and tracking Ganns trades to
get to the nitty gritty of his actual trading strategy. His conclusion was startling. He
told me that Gann simply traded double tops and lows in the direction of the daily
trend, nothing more, nothing less. After eight weeks in the archives of the library
he was adamant that what Gann wrote in his courses and what he traded were two
very different things. Maybe the lesson for all of us is to keep things as simple as
possible.
CHECKPOINT 1:
What is Asia doing? Every morning I go to Yahoo Finance and see what the Asian
indices are doing. If they are all up, I expect a bullish Europe.
CHECKPOINT 2:
I go through the major currencies (dollar, sterling, yen and Swiss franc) and their
crosses on the weekly, daily, four-hour and 60-minute chart. I look for patterns,
double tops, trendline breaks, and anything else that I can use to gauge for
direction for the day. I also look for Fibonacci ratios and expansion of range bars.
In total, it amounts to 40 charts, and it takes me about 30 minutes. I make notes
next to each pair where I see something of interest. It means I am ready for the
trading day.
CHECKPOINT 3:
I trade indices off a tick chart, but I still need to know what the daily and weekly
trend is in indices.
POST-MORTEM:
Once the trading day is over, the hard bit starts. Trading in itself is fairly
mechanical, although controlling the emotions is something I have to be vigilant
about every day. I easily get over-confident and trade way too big. After the day is
over, it is time to ask the three Ws:
As I said before, there is no better practice than doing, either with a live trading
account or a demo. Keep a log of your individual trades, and make a level-headed
review of each days trading, and you will learn more than any course or book can
ever tell you.
If you want to know more youll find training tools and live webinars at our website
www.intertrader.com
All InterTrader.com clients also have free access to market news reports,
fundamental and technical research, and valuable trading signals. Plus a powerful
charting package helping you to analyse live and historic price data for all the
markets we cover. You can add trend lines and Fibonacci retracements and apply a
full array of technical indicators.
Whether you are interested in spread betting or CFD trading, youll find that
InterTrader.com offers tight fixed spreads* on a fast and reliable online trading
platform, with all the support you need.
*Throughout 2012 our spreads have been fixed 100% of the time during trading hours.
Email: support@intertrader.com