In previous articles we’ve spoken about the importance of defining your level of acceptable risk before entering a trade. How much money are you willing to lose, per unit of investment, if the trade doesn’t go in the direction you’d like?
Systematic traders will have a trading plan which includes a predefined risk amount on each trade and will define their trade parameters before they enter a trade.
Today we’ll talk about another way we can add value to your trading, using some simple management tools in your trading platform. These tools can be found in each edition of d2mxIRESS, including Market Analyser, The Bourse, Virtual Trader and PTP5000.
The d2mxIRESS platform will watch the market for you and act on your predefined trade parameters through the Contingent Order system.
Through d2mxIRESS you can manage your trading completely via a fast and easy-to-use IRESS order pad. (For tips on placing orders in d2mxIRESS take a look at this short video tutorial).
You can link directly to your trading account through the Orders menu, which links to:
• Order Status – displays the status of your current orders;
• Trading Room – show orders that are currently in the market;
• Traded Orders – orders that have completed;
• Create BUY/SELL orders; and
• Create CONTINGENT orders.
From anywhere in the platform you can select a stock and right click to select the Create BUY/SELL Order option, which pre-populates the order pad with the share’s information and allows you to specify the quantity and price for the order to be placed at. There is also an Advanced tab that will allow you to be more specific with your trade parameters (such as setting a limit price, expiry date and the like).
You can also create advanced orders such as OCO, Fill or Kill, and Fill and Kill orders.
Trading the Plan
If you have a trading plan that requires your stock to reach a certain price before you trade, then you can place a contingent order. Best of all, Trader Dealer provides this functionality for no additional charge.
» Call the Trading Desk for more information 1300 610 024 or click here to create a trading account with Trader Dealer
For example you may want to buy MacBank (MQG) if it trades above the high of the past 4 days (which was $41.80). From the Orders menu select the Contingent Orders option, which will pop up the following screen.
FIGURE 13: Contingent Orders Summary screen
Select the +ADD button to create the order.
You can then enter your trade parameters into the Create Contingency screen as follows:
FIGURE 12: Specified Contingent Order screen
Note you can specify the trigger price for the stock to be traded (which may be different to the stock that triggered the order). Also you can specify the expiry date and ask to be alerted by email upon the trade being triggered. There are a number of Trade Pricing types as well, such as Best/Limit and the like.
Once you have entered the order you must confirm the Contingent Order Details (see below).
FIGURE 11: Contingent Order Confirmation screen
Note: The Contingent Order will remain in place until the order is filled or the order is deleted.
Deleting a Contingent Order
If you wish to delete the order, go to the Contingent Orders Summary screen (see FIGURE 13), highlight the order by clicking on it and then select the –DELETE button. You will be asked to confirm that you wish to delete the order before your request is put through.
Trade Management – Trailing STOP
If you are away from the market or simply do not want to be a slave to the computer screen, you can specify that you wish to exit a trade if it rises (and/or falls) by a set number of points or a percentage away from the market price.
This facility proved useful recently, when Magellan Financial Group Limited (MFG) surged. The trailing stop order is set by selecting the +ADD TRAILING button in the Contingent Orders window, and you then specify the order parameters.
FIGURE 16: Specified Contingent Trailing Order screen
FIGURE 19: Contingent Trailing Order Confirmation screen
Trade Management – OCO Contingent Orders
Once you are in a trade d2mxIRESS can automatically manage the trade for you, through your predefined trade parameters. For example, Fortescue (FMG) was recently purchased for $3.00. You could set a contingent order to automatically close your position for a profit at say $3.50 or be stopped out if FMG falls back below $2.90.
This trade management OCO order is set through the Contingent Orders Summary screen (see FIGURE 13), by selecting the +ADD button, then specifying the order parameters. Tick the OCO order and you will be prompted for the relevant trade parameters, as shown below.
FIGURES 17 & 18: Specified Contingent Trade Management OCO Order screen
FIGURE 20: Specified Contingent Trade Management OCO Order Confirmation screen
Contingent orders provide you with great flexibility and control in managing new or existing trades. They are easy to specify and manage and best of all Trader Dealer provides this functionality for no additional charge.
» This video covers how to place orders in the new d2mxIRESS trading platform. You can place market, limit and contingent orders directly from your trading platform and have them executed by D2MX.
The market has been volatile recently. There are other ways we can help you with your trading right now, that you could potentially profit from. If you would like more information please contact me at 1300 610 024 or email email@example.com or register online at www.d2mx.com.au.
For trade ideas and recommendations on how to trade in this market, you can also sign up for a free trial of the D2MX Daily Trading Report, which provides a daily serving of insightful market analysis from the D2MX Advisory team, including:
• Trade ideas and strategies
• Dividend enhancement strategies
• Market scans to watch
• International market analysis, and
• Highlights from the S&P/ASX 200
Investment Adviser – D2MX Trading
This report was prepared by Michael Hevern. It represents the views and opinions of the author. It is not intended for use by any third party, without the approval of Michael Hevern. While this report is based on information from sources which are considered reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect my judgment at this date and are subject to change. Contracting Hevern Pty Ltd is a Corporate Authorised Representative No. 408868 of D2MX Pty Limited ABN 98 113 959 596, AFSL No. 297950 (D2MX), and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd. Opinions, conclusions and other information expressed in this report are not given or endorsed by D2MX, unless otherwise indicated. The information contained in this Report is General Advice only, as the information or advice given does not take into account your particular objectives, financial situation or needs.
Disclaimer: Using leverage to invest can be a two edged sword, as it can magnify your returns when the stock price rises, but will in turn magnify the losses if the trade does not perform as expected.