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[METHOD] Trading in the Financial Markets Online - A Beginner's System

Discussion in 'Making Money' started by stharthjw6j, Nov 18, 2014.

  1. stharthjw6j

    stharthjw6j BANNED BANNED

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    Ok, I dabble in the Indices and I don't mind sharing a little system that I've used in the past with beginners or those interested in trying out trading.

    But first, TRADING ISN'T FOR EVERYONE, read that again. TRADING ISN'T FOR EVERYONE. This isn't simply a disclaimer (this is BHW and I don't need one), this is just my own kind self, warning you that it isn't for everyone, it can actually be a psychological trap if you're unprepared. There is no shame if it's not for you. Which leads me to my second warning:

    START ON A DEMO ACCOUNT. These are very good avenues to learn and test techniques and strategies. It's a different psychological ball game when you start dealing real money, but demo accounts can defo help to ease you in.

    There are many good trading platforms and I won't recommend any to you, a quick Google will show they're pretty much all the same. And when opening a demo account, it's very easy, they don't need to check your financial standing or anything like that.

    So here is the system:

    Using the German DAX or the US NASDAQ look for "overnight gaps", that is, where the opening price is different from the previous day's close. Trading platforms may not show you these so Google "DAX chart" for independent charts of the overnight gaps.

    In trading, gaps tend to close, they make close the same day (our hope) or they may close later, but they do tend to close, because the market doesn't like a gap. This is what we will be basing our trades on (same day).

    For the DAX example:

    Set your chart to the 5-minute bar


    • ONLY TRADE from the high/low AFTER the 1st 5 minute bar + 2 pts towards the last night's close, with also - 2 pts FROM last night's close. (So if the gap is 24 pts, and if the 1st 5 minute bar is 24pts nearest the close, +2 points added, -2 points before the last night's close, this = 20pts gap)
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    • If the total gap is more than 5pts, place a bet that the gap will close. Less than 5 pts, ignore it, the payoff is too small to gamble.



    • Set your Stop Loss at 26 points (maximum you will lose if the trade goes against you)



    • If the gap is more than 25 pts, set your take profit at 25 pts. Just collect it at 25, don't get greedy, because the bigger the gap, the less chance of it closing. (I've tested this extensively and you make more money just collecting at 25pts rather than hoping huge 70 point gaps won't swing against you.)



    • If the bet is not triggered, or ended, by the end of the day, close the bet with wherever profit or losses you are at.


    You WILL get runs of losses, even weeks, this is where it tests your mental strength. Keep at the system while calmly learning/experimenting yourself.

    This method's numbers are working in this period of recent months, other periods of months you may see much higher or lower volatility, so it makes sense to change the stop losses, take profits, etc parameters accordingly. Don't sheepishly dive in copying exactly as I do, this is just a beginner's system. The more you intuitively read what's going on, the more you'll understand when the Index's characteristics change. If you like watching the news (I don't), then reading about the German financial markets will help. I've grown an intuition just by watching the charts' though.

    Avoid trading around the December Xmas period or the summer holidays of July and August, markets become less reliable.

    Research the concept of gap fading to learn more and grow your arsenal of knowledge, there are plenty of sites & forums.

    Again, start with a demo account, test this for yourself first before starting with real money.

    Any questions, fire away.
     
    • Thanks Thanks x 2
  2. financhill

    financhill Registered Member

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    I have been looking for a simple system I can do everyday as this subject for some reason doesnt register in my brain easily as others.Thanks for the guide I will try testing on Demo accounts.
     
  3. godspeed007

    godspeed007 Jr. VIP Jr. VIP Premium Member

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    dude you're genious :)