Enter ABC Trade

Last modified 13:43, 2 Nov 2012

sitmicon34.gifThis content is provided in support of the Safety in the Market (SITM) module for Your SOFTWARE and may not be applicable to your package. For more information, go to the Modules topic of this help.

Entry Plan Details

All the data necessary for assessing an ABC trade are automatically loaded and calculated in the Trade Details work page of the Trading Plan Wizard.

If the trade formation is suitable, purchase orders can be prepared on the basis of the data, and once the trade has been placed, the details can be monitored using the Trading Plan Wizard.

From the Trade Details work page of the Wizard, click the Next button to open the Wizard's Entry Plan Details work page and click the Add button:

The Entry Plan Details dialog will open:

Users manually enter details of the trade as it actually occurred into the text boxes in the top portion, the lower Reference area is automatically populated using ABC data of the selected formation.

Click OK to save the details of the new transaction.

A new row containing those details will be added to the Entry Plan tabbed page's table.

Select a row and click Edit to make changes to the entry plan for an existing trade.

Click Add to enter the details of an entirely new trade relating to this ABC formation.

Add Alert

When a new trade is added an information box appears asking if you wish to Add an Alert for the exit stop:

Click Yes to add the alert, it will display in the Activated Alerts table and will operate in the same manner as any other alert in Your SOFTWARE. Refer to the Alerts help topic for more information on Alerts in general.

Trade Details Entry Area

Entry Type

Initial Entry is the default when a new Trading Plan is created, use this if it is the first purchase for a new trade.

Additional Contracts is the default entry type when an existing Trading Plan is selected.

In some instances an entirely new Trading Plan for the ABC formation will be required, for example if there are two trading strategies to be followed. In these cases, manually select Initial Entry from the drop-down menu.

Date

Manually enter the date (dd/mm/YYYY), or use the Calendar selector tool to record the date of the transaction.

Price

Manually enter the Price Per Share or security at which the order was actually filled.

Note - This may be different from the amount at which the original order was placed. The actual price should be confirmed with the broker who handled the transaction.

Quantity

Manually enter the number of securities for this transaction.

Brokerage

Enter the full brokerage amount.

Stop

Enter the Price Level of the Stop that will actually be used for this transaction.

Note that a stop level is calculated by the software and displayed in the Exit Stop: Price field of the ABC Trade work page of the ABC Trade Plan Wizard.

While it is advisable to use the calculated level, the actual level of the Exit Stop used in the trade should be entered here.

Risked

This field is automatically calculated by the subtracting the actual Exit Stop from the Price at which the Order was filled.

This is the amount at risk for each security. The total amount at risk is easily determined by multiplying this amount by the total Quantity of securities for the transaction.

Reasons

The Reasons text entry is via a combination box.

Users can record their reason for entering the trade in one of two ways:

  • Manually type in the exact reason why the trade was entered into, or
  • Select from the drop down menu one of four predefined reasons

Four well recognized reasons are included in the drop-down list. We recommend that only these four reasons be relied on when entering into trades early in anyone's ABC trading career. There are more sophisticated reasons for entering trades, but these four principles form part of those more sophisticated analyses as well.

The pre-defined options are as follows:

Legitimate ABC Trade - Entry within 25% Limit

This is a conservative strategy, ensuring that the risk-to-reward ratio is favorable.

For a detailed explanation of how to employ a 25%, refer to the discussion in the Stock Trade example trade beginning on page 162 of the Smarter Starter Pack manual (3rd Edition).

The 25% Entry Limit parameter is set the ABC Parameters of the tool that first identified the ABC formation, for example the ABC Points - Long/Short Hi-Lite.

Legitimate ABC Trade - Entry within 33% Limit

This slightly more aggressive approach would be employed if the market was strongly trending. The risk-to-reward ratio is lower, but other circumstances lead the trader to offset the risk against the greater probability that the market will continue its trend.

For a detailed example of when and why to consider using the 33% Entry Limit, refer to the discussion in the Currency Trade example trade beginning on page 177 of the Smarter Starter Pack manual (3rd Edition).

The 33% Entry Limit parameter is also set the ABC Parameters of the tool that first identified the ABC formation, for example the ABC Points - Long/Short Hi-Lite. Selecting 33% will toggle the 25% setting off. There is also a setting for Other, we do not recommend using this setting until extensive experience in ABC trading techniques has been gained.

Legitimate ABC - 33% with Expanding Ranges

This exception will over-ride a 25% Entry Limit, and allow ABC formations of up to 33% to be identified, when those formations is have an "expanding range" relative to the previous range (not necessarily the previous ABC range) in the same direction.

For an example of its use, refer to the discussion on the Stock Index trade example beginning on page 194 of the Smarter Starter Pack manual (3rd Edition).

This ABC setting is activated by setting the Entry Limit to 25%, and selecting the Allow for Expanding Markets check-box in Filters group of the ABC Parameters dialog box of the ABC tool that identified the ABC formation.

ABC Trade - Overbalance in Price

This setting over-rides the requirement that the current B exceed the previous swing-top (for long trade /swing bottom for short) if the following overbalance criteria relating to the previous price range in the same direction applies.

Overbalance in Price means that the current favorable A-B range swing so greatly exceeds the previous swing range movement in the same direction (not necessarily an ABC formation) that the ABC formation can be identified as a potential ABC trading formation even though the relative level of point B's swing does not exceed the previous swing top or bottom.

The multiple by which the A-B swing must exceed the previous swing is defined by the user. The default is 3.

This setting will work with either 25% or 33% (or Other) Entry Limit settings.

It is set by selecting the Include Overbalance in Price check-box in Filters group of the ABC Parameters dialog box of the ABC tool that identified the ABC formation.

Reference Area

This table provides details of the Point C reference point on which this trade is based and defines the range in which valid trades can be made.

On the previous ABC Trade work page the Entry and Exit Stops have been calculated for this Point C by the software, they are also displayed here. These details will assist traders in preparing their buy orders.

Note also that for each date, the day of the week is also displayed.

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