Simple rule – watch the cost
Traders in indices, shares, forex, and commodities must always have backdrop of the basic rules that revolve over going with trend, and limiting losses & good money management. We have covered these products extensively, how you can avoid mistakes & some other significant factors to watch while trading Cads. Also there are a few commonsense rules, which don’t need to be applied rigorously, however add one more level of comfort in what is very stressful procedure.
The market makers and some other brokers are not very stupid, and setting of the prices & spreads depends on some factors that include time of a day, volatility, before & after news products. In case you have the system, which is not modified to quick, intra day moves, your selected timeframe is looking for the results in anything up to month, and then minute-by-minute timing is less significant than getting an overall picture right.
On this basis you have to decrease the slippage costs if possible, so time to place the trades must be when spreads are narrowest. After some time you must use to normal minimum spreads on majority of the shares, and until there is pressing requirement to instantly deal, then it will pay to always make sure spread is at minimum prior to dealing.
It means not trading in first few minutes of trading day as the buyers and the seller’s position themselves for session. At times whole market might not be marked down, example on the heavy fall in the Far Eastern stocks, however spreads may be wider due to frenetic nature of an early dealing. After some time though spreads must return to normal, you can deal little more comfortably.
For example: You have system that makes use of 3% targets & 2% stops, say you buy & sell the Royal Bank of Scotland that shares with minimum of 1p spread that represents 0.05% or else 5 basis point-spread. Time after time spread widens & is 5p after the outside event or else early in morning. It means if applied to both the sides of trade, dealing on this spread will cost an extra 0.4% to 40 more points and negates half of an edge of the system that is serious. You will most likely find out that you will become accustomed to ebbs & flows of some shares, and in case you feel that you are on boil with all these companies, you have an edge.