Tuesday, May 10, 2016

Trading on eToro Review



I have been trading with eToro for the last 3 years and have found eToro to be great way to scratch the trading itch without having to risk large amounts of capital - thanks to its finely-tuned trade ticket.  Details on how best to get the most out of eToro trade ticket I have outlined below.  At the end of this article I have included a list of (low-key) performers on eToro you should consider following or copying.

You can start by registering with eToro. I recommend starting with the minimum deposit of $200 and using the 1% risk rule of available capital; this means if your starting capital is $200, then your first trade will risk $2. So in risking $2, what is the initial position size to use?

The eToro Trade ticket will default to a standard $25 lot, with a 50%(!) stop, usually on x100 leverage. You will not want to enter your first trade this way. First thing will be to change the leverage to x1, then change your stop loss to $1 just to avoid any errors.

The short video (no audio) will show you how to use the Trade Ticket to calculate the trade size based on your chosen stop:

1. First set the stop you wish to use
2. Set Leverage to x1
3. Adjust Levarage and/or Amount until you get to your selected risk (here, $1).



The Golden Rule is to only ever risk 1% of available capital.

If you can follow the Golden Rule you can never burn your account to zero. Why? Depending on your starting capital, and by following the Golden Rule, you will reach a point where you can't put on a trade because you won't meet the minimum requirements for a trade. The one exception to this is if there is an external shock to the market, such as the Swiss Franc adjustment, where there is a big gap. This can lead to a greater than 1% loss, but if you manage your trade amount and maintain a low leverage you can mitigate against this, even if this means a larger than expected pain. Whole companies (Alpari UK) went down on these shocks, but your account doesn't have too.

What does the Golden Rule look like in practice?
  1. You open an eToro Trading Account with $200. 
  2. For your first trade you are allowed risk up to $2 (1% of $200).  You decide to enter a EUR/USD trade with a Stop Loss of $2. To achieve this $2 risk your trade has a starting amount of $50 and used x10 Leverage - calculated by following the steps in the video above.
  3. You next decide to enter a DAX trade, so how much can you risk?
  4. Well, your first trade tied up $25 of your starting capital, so you are now left with $175 ($200-$25). This means your next trade can risk $1.75 (or 1% of $175). Here, you take a $50 trade at x1 Leverage, with a $1.75 Stop Loss.
  5. You then consider a third trade. Well now you have $125 ($200 - $25 - $50) left in your trading account, so your next trade can only risk $1.25 as a Stop Loss (1% of $125). You take a look at the market and find no suitable trade which would allow for a $1.25 Stop Loss, so you decide to sit on your existing EUR/USD and DAX trades to see what happens.
As a helpful guide, the table below shows how much leeway you can take for a $1 risk, at different trade sizes of $25, $50 and $100, for a range of assets on eToro. You will notice for certain Leverages it isn't possible to risk $1 at certain trade sizes; for example, there isn't sufficient room based on the spread to risk $1 on a $25 EUR/USD trade at x50 leverage, but many do try to do it...



Remember, if for your first trade, the amount of capital used was $50 to generate a $2 risk, then your second trade will only risk $1.5; i.e. 1% of $150 ($200 - $50).

Start by trading assets like FX which have tighter spreads, DAX is good too, at x1 and x2 leverage and don't go beyond x 25 leverage, but always stick to the 1% capital risk rule.

Never let a trade lose more than 50% of the capital size of the trade. When you copy traders it's not uncommon to see traders rack up 300% losses, albeit on a $2 trade, but it's bad practice.

Still confused. Try following and/or copying some of the low risk traders on eToro. Below are details of my trading.


February's loss was particularly galling as January's lows marked a capitulation, which led me to enter a long stock trades, but the volatility was too high for them to survive their stops.

I would also recommend going it alone with some, if not all of what you deposit. For those who want to go it alone, you can follow my postings on Stocktwits or Twitter for ideas and independent opinion.

Here are eToro traders with solid two-year performance on low risk. Don't be concerned by the lack of copiers for these traders, they are doing things right - away from the limelight:



Be Realistic...

You are not going to achieve 10% or 25% gains a month; if you achieve 10% a year you will be outperforming 80% of professional traders and hedge fund managers.  For a $200 account that is an annual return of $20. This may not be much in real terms, but if you can achieve this and want more, then look to increase your available capital to trade - but don't look to increase your risk. eToro regularly run Deposit Bonuses for new and existing members throughout the year.

As a final note, do not copy anyone who promises or sells to you a return on a monthly basis. That's pure BS which will see your account turn to $0 in weeks.

Remember - Golden Rule - 1% of available Capital.  No cheating!!!

Now Go Get Started Here.


Wednesday, December 4, 2013

How to use my Stock Pick List

I keep a running track of my breakout scan as a delicious bookmark list. You can take this list as a feed, directly follow it on delicious, or follow me on Twitter or Stocktwits to get the stocks as they are posted. I also maintain a tumblr featuring some of the charts of stocks on the list.

The list is a watchlist of opportunity for stocks making new highs on volume.  It's not meant as a direct 'buy' list, although some stocks may feature which offer low enough risk opportunity, to take the leap on the next open (at the right price). 

I like to look back at stocks which triggered 2-3 weeks ago. I'm looking for stocks which have retained the bulk of their gains, but where the volatility has dropped - facilitating a low risk entry.  I also like stocks that don't violate the breakout gap (if any). 

For example:

If we take the stocks which featured between Nov 13th - 20th we have the following list:

Nov 13: M, PEGA, ELOS, TPH
Nov 15: GIB, CREG, FNMA, TTEK, FMCC
Nov 18: ASX, A, LFC, CVV, FONR, GFF, HCSG, HMIN, MJN, CAF
Nov 18b: AEC, KIRK, FONR, ASX
Nov 19: ADP, AWRE, HOLI, POZN
Nov 21: BONT, CSII, GPT, YZC

We can then collate this into a Watchlist. I do this for charts first, but it's also handy for building an alerts list in Zignals

This gives a summary which looks like this:



From there, it's a question of eyeballing opportunities.  

In the above list, interesting stocks include: BONT, CAF, CSII, CVV, GFF, HMIN, KIRK, MJN, PEGA, and POZN

At this point, you can use Zignals Stock Alerts (Zignals HTML5 is due to launch in February 2014, and will include Technical Alerts) to set the triggers for entry/stop protection, or eyeball on a chart during market hours for movers. 

**Use all information provided at your own risk**

BONT:  Very tight action. Stops on break of $17.50. A move above $18.00 would probably be enough (on at least 20K shares in a 15-minute period).  It's illiquid, and the initial breakout turned into a +$6 gain from $12s. A push to $20-22, where it traded in the summer, does not seem outlandish.  

CAF: Stop on close below $23.50, although I would let an initial intraday break of $23.50 slide as there is likely to be lots of preset stops down here which could be knocked out for a cheap entry (both 20-day and 50-day MAs are below to provide support). A move above $24.50 offers a $26.50 initial target. 

CSII: Moving up in gap-steps. Stops can go on loss of $32. A close above $34 should be enough to see this push higher. Target of $40. If there is a downside, it's that technicals suggest it may take longer - and base deeper - before moving higher. A move to close the gap would not be ideal, but GTC-Buy order fishers could try and net some in the low $31s, with a stop on break of $29. A Zignals alert is ideal for the latter set up. 

CVV: Maybe still a little too volatile. It has shaped a $12.50-14.00 range which offers entry on break above, protective stop on drop below. However, past few days suggest it could venture into the gap and touch $11.50. Technicals also look to point to this.  If it dropped below $11.50 it would lose the base set-up, so consider $11.50 the last-chance saloon. 

GFF:  This is the kind of stock buy-and-holders should like. It's not going to do much day-to-day, but over time it could reward you.  Wouldn't want to hold as a trade below $12.25, but if you were looking to accumulate over time, then this looks like a stock to consider. 

HMIN: Much more of a trader's play. Great volume action. A solid looking support level at $38. Yesterday was a first attempt at getting past $42 since the original breakout trigger. Technicals in good shape.  The Santa Rally contingent could see joy here. Look for a move to $48. 

KIRK:  A similar proposition to BONT. A near $9 move from $17s has tightened considerably. A pop above $26 could see a big short squeeze.  Potential long term buyers would want to see a new base form (of 2-3 months duration) to consolidate these big gains.  Day traders can be less picky on this. 

MJN:  Lacks the buzz of a HMIN, but bidders seem keen to get this into the high $80s. It doesn't look like $82 is going to see a test, so stops could go on a loss of this price (which is also below the 20-day MA).  Big uptick in accumulation and bullish technicals. A sleeper bull play. 

PEGA:  This is more an example as to what we want to see happen in the above. November's big gap consolidated into very tight action, before it took another push higher - taking the stock above the psychological $50 barrier.  This $50 zone is again getting tested, this time from the top, in tight action. If there is a concern, it's that a close below $50 would generate a 'bull trap'; effectively trapping the people who bought the push from $48 to $51.50. This kind of action is the downside risk to watch in any of the plays listed here. For a stock like PEGA, a 'bull trap' offers a swing traders short-play to fill the gap down at $42. Risk for a short is on a move above $51s. Such counter plays can be more attractive than the initial long play, and should be viewed as alternatives if the initial long position goes against you (and not try and convince yourself the long-side is the right-side to be on).  

Even if your preference was to play the long-side, a scramble to the exit style sell off could see you pick up a bargain using GTC-buy orders/alerts. In PEGA's case, $40-42 should be significant support. 

POZN: Another stock in the KIRK, HMIN set up. A big move higher, followed by a tight consolidation at the highs. Also lacks liquidity. A break above $8 sets up an opportunity for a measured move to $11. Technicals and volume firmly in the bulls camp.  Once it's looking like the stock will close above $8, stops could be adjusted to a loss of $7.75. 

If all of this sounds like too much work, I also maintain a tumblr blog of stock charts I come across. 

Please visit my parent blog, which keeps track as to what the broader market is doing, and identifies sectors which may be of interest to traders.

All of my content can be found in my Twitter/Stocktwits feed, including content on Biotechnology stocks I do for the Motley Fool. I recommend a follow if you like what I do. 


Friday, October 4, 2013

ActivateClients to Launch New Market DNA Candlestick Trading Application on Bloomberg

UPDATE: The new ChartDNA app will be soon is now available on the Bloomberg app. store: APPS DNA<Go>


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ActivateClients are looking for Alpha testers for a new Candlestick Pattern Matching application available in the Bloomberg App Store.

If you have access to a Bloomberg Terminal and are interested in trying this application out - giving us feedback on what you like/dislike/want to see added, drop me an email: dfallon-at-activateclients.com or send me a tweet.

All that's needed is your Bloomberg UUID to get started.  The App will retail at $295 / month for equities.

Sunday, September 1, 2013

Visit markets.fallondpicks.com

I have this as a holding page until I figure out what to do.

In the meantime, visit my blog at markets.fallondpicks.com