IT IS A BASIC RUN DOWN OF HOW I DO THINGS BUT BY NO MEANS MY COMPLETE STRATEGY I WILL BE PUTTING THIS UP HERE IN SECTIONS BIT BY BIT, AS TIME ALLOWS. IM STARTING TO GET SOME TRAFFIC TO THIS SITE NOW, SO IF YOU WANT THE INFORMATION TO APPEAR FASTER KEEP SHARING THIS SITE AND MAKE ME FEEL WANTED :P
REMEMER: No strategy on the stock market is bullet proof or guaranteed to make you money. All we can do is stack the odds in our favour and hope it works out (which if you do the right thing it generally does work out well) Again .... Don't bet money you can't afford to loose, Capeesh?
First up: I use the http://www.igmarkets.com appication to trade on. Sign up with them and get yourself familiar with the platform. its fairly easy to use but if you want to use another platform thats up to you, i get nothing out of this and its more important you feel comfortable on what you use. The figures however may change dramatically on other platforms so be careful to take that into account when using this method.
I jump into the market with $2000 of my own money which means YOU have to deposit money in to your account. I generally feel that $2000 is a safe number in normal market conditions but if you're willing to take a punt on less money thats your choice.
I buy positions in the asx200 to go up and / or down (depending on where the market is at the time) This would be one contract (which at time of writing this uses around $26 of your equity) If you can't find this search ASX200 $1 mirco contract in the search section and add it to your watchlist
Lets say for this example and for the purposes of keeping shit simple the market is low on my entry point into the market. I would buy one position to go up.
Then i wait to see what happens. It will either go up or down.
EXAMPLE 1: IF IT GOES UP: lets say it goes up 10 points ..... I usually close off the position and take my money. In this example we are trading on 1 x ASX200 and each point it goes up makes me $1 so that would be a total of $10 (remember I use Australian money)
This means if you put in $2000 you would have used $26 equity to buy the position and a small amount of brokerage it it showed a gain of $10 and you sold it then you would be left with $2010 in your account and nothing in your open postions screen. You can choose how much profit you want to take per trade but when trading on one contract I'm usually happy to take anything over $5
Then i would buy the same position back at the current market price and wait again.
EXAMPLE 2: IF IT GOES DOWN: Don't panic let it ride out ... if it goes down more than 20 points (which will work out to $20 AUD) buy another position.
This will work out to $26 you have spent on the first position and $26 you have spent on the second position and a $20 loss of equity you have sustained on the first position. your account will therefore show $200 minus $56 (equity) and a loss of $20
Then again we sit back and wait.
It will either go up or down and (as in the previous example) and you either take some profit as shown in example 1, or wait and buy again if it goes down another 20 points. Then you sit back and wait again. Lets say the markets bounce back a little and your second position showed a gain of 10 points you would sell it and you would be left with your original position showing a loss of around $10 and your total would be $2010 with a loss of $10 with an available to trade balance of $1974 which is $2010- $26 (for the first postion) and $10 loss + $10 which you made on the last trade
YOUR SAFETY MARGIN
Basically if it goes down 20 or more points buy it again if it goes up sell it. This pattern works with a fair range so if you started at a certain point, lets say 5400 on the ASX200 this pattern will allow you to keep the pattern going for 15 or so positions going the wrong way with a range of 350-400 points so around 5000 points. Basically if the market goes down more than that you stand to loose your money. Generally speaking I find it a safe trading range to start out and of course the more trades you make and the more equity you build up the safety margin increases. This also assumes that you buy them every 20 points apart. Obviously you can't watch the markets 24 hours a day so there will be many postions you buy say 35 or 30 or 40 points apart which will only increase the trading range you have.
Obviously the more money you have in your account the greater your trading range will be. The more of those little trades you close off at a profit builds up equity in your trading stash. I would generally make around $50 per day off trading on contract like this so if you trade for more than a month you might find you have $3000 equity and can track the market down a lot further, increasing your trading to range to around 500 points.
Generally speaking a 400-500 point range will be fairly safe in normal market conditions. However if you get caught up in a market crash you will most likely lose your deposit. But of course, I will show you other ways to safe guard your trading fund in future articles :)
This by no means is my entire strategy but it's the major part of it. It's shit simple and easy and has worked for me for many years now.
I will post more articles soon on:
- How to safeguard your trading fund
- Coping with market volatility
- How to withdraw money
- How to increase your gains
- How to hedge your bets in falling and rising marketts
- What to do in a crash
Stay tuned!
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