Day trading stock online is real seat of the pants stuff for all participants, but none more so than for the novice trader. The casualty rate is high enough amongst experienced professionals, but for the raw beginner it can be an absolute minefield if basic day trading principals aren’t rigorously adhered to.

Just because you’ve made a few successful mid to long term trades in your time doesn’t ensure that you’ll be the next talk of Wall Street when you try your hand at day trading stock online. Far from it!

Not surprisingly, day trading irrespective of the asset class involved has been likened to extreme sports, with the only difference being that the thrills and spills are confined to the minute by minute fluctuations of your trading account. Perhaps the only saving grace for those who fail to plan their trades in advance is the fact that no positions are held open, i.e. carried forward, to the next day. If nothing else, this limitation helps prevent further erosion of capital when a trade turns sour.

So what motivates investors to become involved in day trading stock online?

A primary motivation of day trading stock online is understandably the lure of quick money. Another motivating factor is that it isn’t necessarily any riskier than other forms of trading activity. However, unless thoroughly tested and proven trading strategies are put in place with each trade, the risk of incurring substantial losses within a frighteningly short period of time is all too real.

Basic Strategies:

There are six basic strategies day traders use to make a profit:

1. Spread covering
2. Technical trading
3. Scalping
4. Range trading
5. Playing news events
6. Trend following.

Spread covering refers to buying at the BID price and then selling at the ASK price. The spread is the difference between these two prices.

Technical trading is simply the action undertaken by a technical analyst. He or she evaluates securities by relying on the assumption that market data, such as price charts, volume, and open interest, can help predict future, usually short term, market trends. Unlike fundamental analysis, the intrinsic value of the security is not considered. Technical analysts believe that they can accurately predict the future price of a stock by looking at its historical prices and other trading variables. Many technical analysts are also market timers, who believe that technical analysis can be applied just as easily to the market as a whole as to an individual stock.

Scalping refers to an extremely quick trade for a small profit. For example, if you bought 20,000 shares in XXX Inc. @ $1 per share, i.e. $20,000 invested, then sold them 45 minutes later for $1.03 per share, $20,600 gross return, you would end up pocketing a cool $600 less brokerage.

NB: Remember that when you are day trading stock online, the round turn brokerage fees are minimal.

Range trading is a little harder and inherently more risky, but the returns can be proportionately greater, too! If you are canny enough to be able to pick the intra day market swings and either BUY at or near a low, then SELL at or near a high you can often make substantial profits using this method. But you do have to be wary, because if you buy into what you think is an intra day low point, only to discover that the market sentiment has changed and that a severe sell off is in progress, you could get badly burnt!

Playing news is the realm of the adrenaline seeking day trader. The technique refers to buying a stock which has just announced, for example, a short sell on bad news, the contrarian traders love this sort of play as they will be standing in line to BUY the stock at the end of a short, sharp sell off in the belief that most if not all the bad news is already factored into the market and therefore there wont be any further downward pressure. The sheer volatility offered by unexpected news announcements can provide the diligent day trader with huge potential for quick profits, or losses if they call the market incorrectly.

Trend following assumes that if a stock have been rising steadily it will continue to rise. Admittedly, this technique is better suited to position traders, i.e. where stocks are held for a number of days, weeks or even months, but in strong bull markets some stocks will rise steadily for days on end, making the intra day trend follower a very happy chappy.

Live Coaching

When trading on an intra day basis you need to take into account many factors including: time of day; liquidity; pending announcements such as corporate profit reports, interest rate movements, currency fluctuations; macro and micro trends; market sentiment, in fact, almost anything at all that may have an impact on your trading results.

So, if you want to radically improve your day trading stock online skills, live coaching or even online mentoring with a recognized industry professional can be worth a hundred times the price paid. Coaching can take place in different forms including: in person coaching; online coaching session; or over the phone.

If you’re hell bent on being successful, but you’re still new to the game, you’ll be tossed to the lions unless youve acquired the necessary physical and mental skills to survive and profit from day trading stock online. Do yourself, your pride, your career and your bank manager a big favor by making the commitment to learn as much as humanly possible about this fascinating and potentially very rewarding form of investing, and secure the services of a live coach to see over your trading.

After you`ve set your initial stop loss, chosen your method for calculating your trailing stop loss, and implemented all your money management rules, there is one last thing you should do; you should begin back testing your system.

With out back testing you will be headed in the right direction, but you won`t know what to expect from your system. Back testing will also give you the confidence to keep going when you begin to experience the doubt that every trader faces at some time.

Back test your system by applying the rules and conditions of the system to the stock`s historical market data. However, this is only possible if you`re trading a system that is entirely mechanical and does not require any human input to place the trades. How do you know whether or not your system is completely mechanical for back testing? Can you take down your trading plan, the set of rules and guidelines that you follow, and hand that over to someone else, who could then trade the same system and receive the same results as you would if they followed the system carefully?

If you can do this, you have a mechanical system that is ready for back testing. If you can`t, you should look at implementing a completely mechanical system. Perhaps one of the hardest parts in trading any system is to have the confidence to stick with your system. In fact, a mechanical system almost forces you to make decisions that are in direct conflict with what your gut feeling might tell you to do.

Remember, our gut feeling tells us we should hold on to losing stocks until they get to the break even point, and our gut feeling would tell us to sell shares as soon as we`re a little bit in profit. Obviously, a mechanical system goes against these human tendencies, and that is one of the reasons why it`s psychologically difficult to trade. However, back testing a mechanical system, will tell if you it your plan will work or not.

While back testing will not tell you with 100% accuracy what the profitability of your system will be once you start trading it, it will give you a very good sense of what you can expect. All prices are driven by the same two factors, supply and demand, in the present and in the past. So, even though price movements are never going to be exactly the same, in your back testing you will see the patterns, and similar movements that show up over time. With back testing you can discover the how profitable you system is likely to be, and how often you are likely to have a loss rather than a profit.

Back testing your system over different market conditions, it can be reasonable to draw parallels as to the performance of your system historically to its performance trading it in real time. Knowing this, because of back testing, will make it much easier to stick with your system, and the profits you can realistically skyrocket.

If you’re looking for a good piece of technical analysis software to do the back testing for you you should have a look at MetaStock End-of-Day or MetaStock Professional (for day traders).

-=-=-==-=-=-=-==-=-=-=-=-=-=-=-=-=-=-=- David Jenyns is recognized as the leading expert when it comes to MetaStock and designing profitable trading systems. His MetaStock website offers a huge free collection of trading related tips and tricks. Gain free access now. Click Here ==> http://www.meta-formula.com/subscribe -=-=-==-=-=-=-==-=-=-=-=-=-=-=-=-=-=-=- Article Source: http://EzineArticles.com/?expert=David_Jenyns

]]> http://www.financialmarketplace.com/the-idiots-guide-to-back-testing-trading-systems/feed/ 4 http://www.financialmarketplace.com/wonder-which-charting-software-is-the-most-popular/ http://www.financialmarketplace.com/wonder-which-charting-software-is-the-most-popular/#comments Mon, 03 Nov 2008 16:49:10 +0000 admin http://www.financialmarketplace.com/?p=193 I recently came across the following blog post that ranked (based on an internal survey) the most popular charting software was. Note that the sample size is unknown (although it’s stated that it is in the 100’s) but interesting nonetheless. Nice to see MetaStock in the top 10!

The Most Popular Charting Software is …

Posted by: Barry Burns

Recently I took a survey of my students asking which charting software they use.

This is only a small sample, and therefore not necessarily representative of which software is the most popular in the world, or even the US. It only reflects the responses I received from my students who responded to the survey.

I received hundreds of responses and thought you may be interested in the results. So here they are, rounded to the nearest whole number (you’ll notice that they total more than 100%, and that is because many people use more than one software for charting):

1. Ninja Trader: 42 %
2. Tradestation: 30 %
3. Meta Trader: 27 %
4. Interactive Brokers: 21 %
5. eSignal: 18 %
6. MetaStock: 16 %
7. Think or Swim: 14 %
8. GFT: 13 %
9. Ensign: 12 %
10. Telechart: 12 %
11. FXCM: 12 %
12. TD Ameritrade: 8 %
13. Fidelity: 6 %
14. MultiCharts: 6 %
15. E Trade: 4 %
16. Schwab: 4 %
17. NeoTicker: 2 %
18. QCharts: 2 %
19. Other: <2 %

What charting software do you use?

Sign Up For Instant Access & Receive Your FREE Buyer’s Guide Right Now!

You Will Discover …

1. The version of MetaStock that’s perfect for you based on the type of trader you are.
2. How you can quickly scan through multiple securities to find that “diamond in the rough”
3. The easiest way to create your own custom formulas
4. The most effective way to license the software based on your budget
5. The most reliable data sources for developing informed trades.

Why waste your valuable time trying to figure out which version of MetaStock is right for you?

Download a copy of our MetaStock Buyer’s Guide and discover “The 8 Vital Questions You Must Ask Before You Purchase Technical Analysis Software” today!

P.S. – MetaStock is one of the best selling technical-analysis software tools in the world – and the 16-time winner of the Stocks and Commodities Readers’ Choice Award. Find out now if MetaStock is right for you!

What are you waiting for? Really this is all about you finding the right technical-analysis software tool so you can trade with confidence! Let us help guide you.

They point out that while software (such as Tradecision or MetaStock) can help you with your trade decisions, there are some key rules that you must follow in order to ensure that you trade with a profit.

These include:

1. Maximize your profits, not the number of trades
2. Don’t risk more than 1-3% of [your] capital
3. Be patient enough to wait for good trades
4. Be patient enough to avoid closing a profitable position too early
5. Don’t tie yourself down with your “first-blush” opinion about a position
6. Immediately close your position when the initial conditions are disrupted
7. Make a decision about the stop level before entering a position
8. Cut losses early, protect profits with trailing stops
9. Return to a trend if your previous assumptions turn out to be wrong and the trend is progressing
10. Focus on big market moves. Don’t try to catch small, noisy fluctuations
11. Focus on price patterns and formations rather than the price levels or support-resistance levels
12. Make your own trading plan
13. Your trading method should be in sync with your personality
14. Maintain discipline to be able to strictly follow your plan and manage risks
15. It is only you who is responsible for your trading results. Don’t try to blame the market, your friends and brokers and so on

The original article can be found at:

http://www.theaustralian.news.com.au/story/0,25197,24335215-5001942,00.html

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“Software Tools Revolutionise Retail Investment”

James Dunn | September 17, 2008

It’s weekly interactive forum for MetaStock users to meet and exchange strategies and ideas. The meetings discuss topics ranging from stocks, futures, FOREX, and options to any other current trading topics. The online users group will be hosted by various MetaStock and trading professionals.

It is held each Tuesday @ 6:30 pm MST (8:30 pm EST)

You can find out more by going to: www.Equis.com/customer/resources/usergroups/

Don’t miss this opportunity to learn from true industry professionals. This users group is a rare opportunity to learn from other MetaStock clients, as well as MetaStock experts… and it’s Completely FREE.

Technorati Tags: MetaStock

According to http://softsia.blogspot.com/2008/09/personal-stock-streamer-921.html here is a a quick rundown of this nifty little program:

Personal Stock Streamer (PSS) is a complete stock streamer and trading platform for the active US investor.

With PSS, investors can:

• Track hundreds of streaming stock tickers
• Manage multiple accounts and portfolios
• See intraday and historical charts with candle, line and OHLC types and technical analysis indicators including SMA, MACD, RSI, Money Flow, Bollinger Bands, Momentum, and many others
• Mark up charts with annotations
• Produce asset allocation charts
• Collaborate and share stock tips and live annotated charts in real time
• Create watchlists
• Record filled orders in a complete transaction register supporting buy, sell, dividend, dividend reinvest,share transfers, return of capital, sell short, buy to cover and split transaction types
• Retrieve options chains
• Execute live trades through US exchanges including the NYSE, AMEX, & NASDAQ
• Calculate unrealized gain or loss on a lot by lot, ticker and portfolio basis
• Produce capital gains reports
• Send expression based alerts to email or mobile phones
• Exchange data with Quicken(tm),Microsoft Money(tm) and Metastock(tm)
• Feed live tickers into Microsoft Excel(tm) for custom analysis; create custom asset classes
• Drag and drop Internet bookmarks
• Use a currency table and converter
• Place a light weight stock ticker bar on the desktop
• Read per ticker news headlines
• Organize view layouts with any of several dozen data fields including symbol, price, change, high, low, volume, spread, bid, ask, 52 week high and low, P/E ratio, EPS, dividend, yield, beta, market cap, gain, and others
• Get quick access to online research including EDGAR and finance.yahoo.com among others
• Use the scripting API to develop custom indicators, reports and extensions in VBscript(tm) or JScript(tm)
• All for free w/ supported brokerage accounts.

For more information go to: www.PersonalStockStreamer.com

In Part 2, of Designing a Trading System in MetaStock I covered how to code the first two of the four major components of a mechanical entry system. I had explained the coding of price and liquidity. In this article, I will cover the steps for coding the remaining two components, trend and volatility, into MetaStock. In the end, you will have the complete codes for a mechanical entry system.

Let`s begin with trend identification. Remember, `the trend is your friend` when trading. You always want to trade with the trend, not against it. Think of it this way, if you were swimming in the sea, and got yourself caught in a rip tide, is it easier to swim with the current or against it? It is the same with trading with a trend.

There are many ways to identify trends, and it`s not particularly important which method you use. You just need to use one. One of my preferred methods for identifying trending stocks is to find stocks that are trading at their current highs. You can do this by stipulating that the highest high price must have been achieved in the last `x` number of days.

Once again, the variables you use will depend on the time frame you are trading. But for this example, you want the highest high price in the last 240 days to have occurred in the last 20 days.

Using the formula reference section in the MetaStock Programming Study Guide, you can find the syntax of the highest high function, and then plug in the details. Then, using the `less than` symbol, you can specify the number of days must be less than 20. In MetaStock language that would be:

HHVBars(H,240) < 20

The final component to our entry system is the volatility measure. The aim of including this formula is to identify stocks that move enough for us to make a profit, yet aren`t so erratic that they keep you up at night. There are a few ways to measure volatility. However, my favourite is the ATR method. The ATR indicates how much a stock will move, on average, over a certain period.

For example, a one-dollar stock might move five cents on average over the last 20 days. You can divide this value by the price of the stock and you will have the average percentage movement of a stock. With these values, you can stipulate a minimum and maximum daily volatility value.

For example: You may want the ATR, divided by the average closing price, over the last 21 days, to be greater than 1.5%. Therefore, the average minimum volatility must be greater than 1.5%.

Additionally, you may want the ATR divided by the closing price, over the last 21 days, to be less than 6%. This sets the average maximum volatility at less than 6%. In MetaStock language that would be:

ATR(21)/Mov(C,21,S)*100 > 1.5 and

ATR(21)/Mov(C,21,S)*100 < 6

Putting all our code together, you see what your entry system looks like:

C>1 and

Mov(v,21,s)*C > 200000 and

HHVBars(H,240) < 20 and

ATR(21)/Mov(C,21,S)*100 > 1.5 and

ATR(21)/Mov(C,21,S)*100 < 6

You now have now a workable entry system. Not only did you construct a robust system, but it also adheres to the KISS principal (Keep It Simple Simon). This system can be cut and pasted into the Explorer within MetaStock. However, the entry is only the beginning of a successful trading system. In later parts of this series, you`ll find the rest of the components that you need to design a profitable trading system.

-=-=-==-=-=-=-==-=-=-=-=-=-=-=-=-=-=-=-
David Jenyns is recognized as the leading expert when it comes to MetaStock and designing profitable trading systems. His MetaStock website offers a huge free collection of trading related tips and tricks. Gain free access now.

Click Here ==> http://www.meta-formula.com/subscribe
-=-=-==-=-=-=-==-=-=-=-=-=-=-=-=-=-=-=-

Article Source: http://EzineArticles.com/?expert=David_Jenyns

First, let me offer you the most valuable piece of knowledge I have acquired over the years about MetaStock formula writing. This one secret will turn you into a MetaStock master. Do you think I know all of MetaStock`s hundreds of pre-programmed formula and propriety indicators? Well, I`m good, but I`m not that good.

When coding in MetaStock, the key to getting it “right” is to write what it is you are trying to achieve “down in English”. Once you`ve done this, it is easy to convert it into a MetaStock formula.

Let`s look at an example. Our first entry condition is a measure of price. As mentioned in Part 1, you want to set a price minimum to remove speculative stocks. Please note that the values you select will depend on the exchange you are trading. Some markets tend to be more expensive than others. For this example, we are looking to design a long-term trend following system to trade on the Australian Stock Exchange.

In Australia anything under $1 could be classed as a speculative stock. So how do you stipulate that the stocks you want must be greater than $1? First, “write it in English”: You want stocks with a 21-day average closing price that is greater than $1. Now, you can convert this into a MetaStock formula.

Using the formula reference section in the MetaStock Programming Study Guide, you can check the syntax of a moving average. Once you have this information, it`s simply a matter of plugging in the correct numbers. Then, by using the “greater than” symbol, you can stipulate the price to be greater than $1. The MetaStock code will look like this:

Mov(c,21,s) > 1

Let`s move onto the next component, liquidity. This is a measure of how much money a stock trades. It is important to identify stocks that have enough money moving through them so that you`re never caught with a stock you can`t get out of. For this example, let`s say we require the 21-day average of volume multiplied by the closing price to be greater than $200,000. In MetaStock language this would be:

Mov(v,21,s)*C > 200000

In the next article I`ll go through the last two components needed to design a mechanical entry system in MetaStock. With this information, you will be well on your way to starting an effective, and profitable, trading system in MetaStock.

-=-=-==-=-=-=-==-=-=-=-=-=-=-=-=-=-=-=-
David Jenyns is recognized as the leading expert when it comes to MetaStock and designing profitable trading systems.

His MetaStock website offers a huge free collection of trading related tips and tricks. Gain free access now.
Click Here ==> http://www.meta-formula.com/subscribe
-=-=-==-=-=-=-==-=-=-=-=-=-=-=-=-=-=-=-

Article Source: http://EzineArticles.com/?expert=David_Jenyns

Technorati Tags: MetaStock formula