# The Biggest Trading Lessons Thread



## Kimosabi (3 March 2007)

I thought this would be an interesting Thread Topic.

I'm sure the learning curve for many increased exponentially last week, so what has been you biggest trading lesson/s?

My lesson last week last week was buying a speculative stock(with good potential) about 4 hours before China went south in a market that *I knew *  is way over-inflated.


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## AnalysisParalysis (3 March 2007)

Always check that you placed a sell order, not a buy order.


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## theasxgorilla (3 March 2007)

The single biggest lesson that I can think of for a trader is how TIME and it's derivative, EXPERIENCE, must take their due course.

It is simply impossible (IMO) to short-cut the "experience gathering" process beyond a certain point.  Reading all the books you can get your hands on, staying up all night, trading multiple markets and opening more and more positions just can't substitute.

I've said it umpteen times before, during the early days, as you are letting time pass and your experience build, rate limit your losses.  If you've got 25k to play with, don't expose more than x% at any given point in time ie. based on what you'd lose if all of your trailing stops were hit in a given instant.  Do this and your rate of loss may just be slow enough to allow your experience to catch up and put you on the path to ongoing profitability.

If you don't do this then a market like we experienced in the last few days of last week may cut your account in half and before your know it you're looking for another "less risky" money making hobby.


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## nizar (3 March 2007)

Always use stops.
No exceptions.

Each positon should carry a risk attached of no more than 2% of your total capital, the experts say.

And i personally think that figure should be <<1%.

At least by limiting your losses you should survive to trade again. Otherwise its game over.

Always think the worst case scenario and be ready for it.


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## It's Snake Pliskin (3 March 2007)

nizar said:
			
		

> Always use stops.
> No exceptions.
> 
> Each positon should carry a risk attached of no more than 2% of your total capital, the experts say.
> ...




...but we don't want to be too conservative to miss those opportunities.


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## reece55 (3 March 2007)

That a down trending stock, no matter what the fundamentals are, is not a bargain until it forms a bottom a resumes an uptrend...... And personally, I want heavy confirmation that the down trend has ended.....

It is very easy to look at a chart (say ALL or CSL) and say "I knew that it would recover, it's a great business". The problem is if you buy when a stock is imploding, it's like playing stock limbo - you are never quite sure how low the stock can go!

I had to learn this lesson the hard way in 00 - 01. I bought MYOB because I thought it was a bargain at 2.35. The stock has never recovered - now about 1.20.

Other lessons - don't buy anything in the first hour of trade and don't buy anything where total sellers exceed total buyers in full market depth. You would be surprised how much my trading improved when I followed just those 2 simple rules! 

Cheers


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## IFocus (3 March 2007)

It’s been drummed into me over many years to act not react to markets. Before the correction I watched analysis of the high possibility that the market could correct and at the same time a low risk short trade recommendation was issued 
I never ever trade against trends… never  

I know of valid strategies to do this I am just not that clever so the short trade didn’t make sense even if it was low risk, in hind sight it was simply low cost insurance to minimize the impact of a correction on other positions as we are currently experiencing. A professional at work acting not reacting

The lesson for me was a method of acting not reacting when the evidence mounts.

Focus


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## vishalt (3 March 2007)

Basic things imo, but always happens: 

- Always check your pending orders before/after each trading session, i've sold shares at market and forgotten that I had a pending order... which made me short some shares that I didn't want to. 

- Never put your eggs in 1 basket (don't buy just the 1 share). 

- Never put a huge amount of money into the 1 share at the 1 price, e.g don't buy 5000 of BHP at $28, but rather $28, $27, $26, $25 etc..


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## Nick Radge (3 March 2007)

January 1970


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## Julia (3 March 2007)

nizar said:
			
		

> Always use stops.
> No exceptions.
> 
> Each positon should carry a risk attached of no more than 2% of your total capital, the experts say.
> ...



Are you saying that if you have investment capital of $100,000, no position should be for more than $1000?

Or have I misunderstood what you mean?

Julia


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## nizar (3 March 2007)

Julia said:
			
		

> Are you saying that if you have investment capital of $100,000, no position should be for more than $1000?
> 
> Or have I misunderstood what you mean?
> 
> Julia




Hi Julia,
Sorry i mean $1000 should be RISKED ie. if you get stopped out you will lose $1000.

Eg. Buy JML at 1.14. Stop at, say, 1.06 (randomly picked)
How many shares do I buy?
I buy 1000(my risk)/(1.14-1.06) = 1000/0.08 = 1250shares.

Total outlay = 1250*1.14 = $14,250.

If I get stopped out, i lose $1000

Its called fixed fractional position sizing, taught to me by tech and michaelD and a few books have mentioned it.

Hope that helps.


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## ice (3 March 2007)

1. Don't fall in love with your stocks. 
(That cost me a lot of money in the early days.)

2. Set a stoploss
(That saved me a lot of money in my later than early days.)

3. Listen to the market, not the pundits.


ice


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## money tree (3 March 2007)

dont try and convince bull market geniuses that a crash is coming. They will argue non stop and belittle you until you take their point of view, and you will exit your shorts and buy the top.

   

another lesson - check your codes when buying options. I once bought XJO 2900 puts for 120c.....pity I thought I was buying 3200 puts.....2900 puts were worth 18c.....oops


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## value investor (4 March 2007)

I know I will not be popular. However I think that "stop losses" should be called "make losses". I think that when I pick a stock to buy that I am buying a part of the company, just as if I was buying my own franchise or whatever without the hassle of having to run it, only the benefit of owning a great company at a cheap price. If I felt that I needed a "stop loss" I would then feel like I have not researched the company enough and therefore would rather not buy it. If the price goes down then I would probably buy more as long as my original feelings about the company had not changed.
My biggest mistake so far has been not buying something because somebody else talked me out of it even though I believed it fitted my criteria and then I watched it almost double in a week and stay there.
If you can't tell I am fairly new at this and have read mostly Warren Buffett and Phil fisher. I am yet to see if these ideas payoff in the long run and I would love to hear any feedback on my views.


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## Kimosabi (4 March 2007)

Investing/Trading Lessons 101

Rule #1  Always make a profit
Rule #2  See rule no. 1


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## MichaelD (4 March 2007)

1. Losing more than planned for by ignoring my carefully constructed trading plans.
Lesson learned: In the heat of the moment, don't deviate from the trading plan, no matter what happens.

2. Wasting time on developing things that don't matter much, like being a little bit more right.
Lesson learned: My time is best spent working out how to skew reward:risk more in my favour and improving my money management techniques.

3. Wasting time in circular trading arguments both online and offline.
Lesson learned: Don't waste psychological energy on those firmly committed to being in the 90%.


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## tech/a (4 March 2007)

MichaelD said:
			
		

> 1. Losing more than planned for by ignoring my carefully constructed trading plans.
> Lesson learned: In the heat of the moment, don't deviate from the trading plan, no matter what happens.
> 
> 2. Wasting time on developing things that don't matter much, like being a little bit more right.
> ...





I'm a slow learner!!


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## theasxgorilla (4 March 2007)

MichaelD said:
			
		

> 3. Wasting time in circular trading arguments both online and offline.
> Lesson learned: Don't waste psychological energy on those firmly committed to being in the 90%.




Yes, I noticed you only have 200 odd posts since Dec '05.  Wise indeed .


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## wayneL (4 March 2007)

value investor said:
			
		

> I know I will not be popular. However I think that "stop losses" should be called "make losses". I think that when I pick a stock to buy that I am buying a part of the company, just as if I was buying my own franchise or whatever without the hassle of having to run it, only the benefit of owning a great company at a cheap price. If I felt that I needed a "stop loss" I would then feel like I have not researched the company enough and therefore would rather not buy it. If the price goes down then I would probably buy more as long as my original feelings about the company had not changed.
> My biggest mistake so far has been not buying something because somebody else talked me out of it even though I believed it fitted my criteria and then I watched it almost double in a week and stay there.
> If you can't tell I am fairly new at this and have read mostly Warren Buffett and Phil fisher. I am yet to see if these ideas payoff in the long run and I would love to hear any feedback on my views.



There are different approaches.

You describe an investors approach in which you are right, stop losses are inappropriate. They of course *do* apply to a technical approach.

This has been discussed often here.


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## CanOz (4 March 2007)

value investor said:
			
		

> I know I will not be popular. However I think that "stop losses" should be called "make losses". I think that when I pick a stock to buy that I am buying a part of the company, just as if I was buying my own franchise or whatever without the hassle of having to run it, only the benefit of owning a great company at a cheap price. If I felt that I needed a "stop loss" I would then feel like I have not researched the company enough and therefore would rather not buy it. If the price goes down then I would probably buy more as long as my original feelings about the company had not changed.
> My biggest mistake so far has been not buying something because somebody else talked me out of it even though I believed it fitted my criteria and then I watched it almost double in a week and stay there.
> If you can't tell I am fairly new at this and have read mostly Warren Buffett and Phil fisher. I am yet to see if these ideas payoff in the long run and I would love to hear any feedback on my views.




First of all i respect your point of view, but i don't agree.

Research can lie, price action cannot lie.  

Stop losses protect capital from lies, amoung other things.  

These are my best lessons learned so far with the addition of "cut the losses short and let the winners run", and "plan the trade, and trade the plan" and stick with it!

Cheers,


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## CanOz (4 March 2007)

wayneL said:
			
		

> There are different approaches.
> 
> You describe an investors approach in which you are right, stop losses are inappropriate. They of course *do* apply to a technical approach.
> 
> This has been discussed often here.




What about Enron and HIH Wayne? I bet it was investors that got hurt, not traders using stops......I guess thats what i don't like about research.

Anyway, without  :horse: i'll leave it at that.

Cheers,


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## Wysiwyg (31 March 2007)

During a bull run.....DO NOT sell out too soon.I often see the experienced traders saying to sell half or all at around 20%.Looking at free carried or a hard and fast cut off point.

I have sold out of what turned out to be two 10 baggers,two 5 baggers and lost count of double ups.I estimate I done myself in on 150 to 200 k by not holding.

Funny thing (and slightly suspicious) is the ones that I held tanked or achieved little and after I sold went better.

According to Charles H. Dow the cycle of optimism is about 5 or 6 years which looks at 2008 or 2009 before the slide of pessimiism chimes in.Market vigilance will pay off for those with the time.

Yet to experience a bear market so i`ll keep the 20% rule in mind.


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## It's Snake Pliskin (31 March 2007)

Wysiwyg said:


> During a bull run.....DO NOT sell out too soon.I often see the experienced traders saying to sell half or all at around 20%.Looking at free carried or a hard and fast cut off point.
> 
> I have sold out of what turned out to be two 10 baggers,two 5 baggers and lost count of double ups.I estimate I done myself in on 150 to 200 k by not holding.
> 
> ...




Accept a level of risk and trade it.


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## nizar (31 March 2007)

CanOz said:


> What about Enron and HIH Wayne? I bet it was investors that got hurt, not traders using stops......I guess thats what i don't like about research.




Agree wholly Can.


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## >Apocalypto< (3 April 2007)

AnalysisParalysis said:


> Always check that you placed a sell order, not a buy order.




U poor bugger and I guess it was a CFD!

Man owch! You pick it up quick?


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## Dan_ (3 April 2007)

When you reach your stop...sell

Never hold on and let emotion take over.

Also the most important figure you can look at (including profits) is the bottom line.


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## nizar (3 April 2007)

theasxgorilla said:


> I've said it umpteen times before, during the early days, as you are letting time pass and your experience build, rate limit your losses.  If you've got 25k to play with, don't expose more than x% at any given point in time ie. based on what you'd lose if all of your trailing stops were hit in a given instant.  Do this and your rate of loss may just be slow enough to allow your experience to catch up and put you on the path to ongoing profitability.




ASXG.
Good post, doesnt really matter if its 25k or 250k though, stringent risk management is wise.

Just to elaborate a little, that x% is a % of everything (cash plus shares), so when your losing money, your risking less in $ terms, and as your account grows, you risk more in $ terms.
(probably obvious but i wasnt doing this, until recently i was just using x% of initial starting capital).


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## tech/a (3 April 2007)

Nizar.
Its known as portfolio heat.
Have a google.


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## AnalysisParalysis (3 April 2007)

Trade_It said:


> U poor bugger and I guess it was a CFD!
> 
> Man owch! You pick it up quick?




It was on ILU. I had a sell order in the market (just in case it rallied while I was at work). I thought I was renewing the sell order, because they expire after a week or so. 24 hours later, check email and there it was. The buy confirmation from my broker. I bought at the open of a big red day. So it doubled the losing position, which I'm still holding. It's coming back ATM, so I'm OK. 

I was tired, and made a careless mistake. It is unlikely to happen again.


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## Chorlton (14 April 2007)

Hello All,

Here's some of my own list (in no specific order) - and apologies if they have already been posted by others.......


1) BEFORE placing a trade, know where your stop will be and where you aim to take initial profits. If you can't quantify these levels then you definately can't calculate your risk associated with the trade. Trading without knowing the risk (and potential reward on offer) will ultimately lead to a short trading career!!!

2) NEVER adjust your stop level unless its to capture profits. A stop which is temporarily ignored (or adjusted) as a result of an unexpected price movement for example, is not a stop!!!

3) NEVER catch a falling knife (ie. Average down). I used to do this when I first started trading and I can honestly say that, overall , I ended up with bigger losses!!!  If you trade using TA and the SP moves against your initial position, then obviously you should do something about it but this does not include adding to ones position!!!

4) NEVER fall in love with a stock. It will seriously cloud your judgement in times of uncertainty. It did for me in the past........

5) Have a trading plan and trade it accordingly.  This way consistancy can be maintained and controlled over time. It will also help to take the emotion out of trading which on its own can cause major problems to ones trading account.

6) Never subscribe to websites, newsletters, etc if the only intention is to receive hot stock-tips for example. This is a surefire way to lose money very quickly. If you want an easy way to make money, then stick your capital in a savings account offering around 5% and take up golf instead!!!!

7) Treat trading as a business and not a hobby unless you like the idea of only spending money.

8) Ensure you have enough funds in your account to allow for a string of losses. There is a lot of material written about levels of risk. No more than 3-5% of overall capital per trade to be risked for example. If this level of risk is too small in terms of $ amount for you, then maybe you should question the size of your account, and whether you have enough to trade for the long-term?

9) Keep your trading positions to yourself. In other words don't share your positions with friends or family. In you do then this IMO will add unwanted additional pressure on you to always pick winning trades. To make money in trading, losses need to be openly accepted. 

10) The realisation that to make money in the markets, one needs to forget about making a profit but instead focus on minimising losses!!!!!!!!!!! 


Chorlton


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## CanOz (14 April 2007)

Heres one:

Know thy instrument....and know it well.

Cheers,


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## Knobby22 (14 April 2007)

*1. Don't sell too quickly!*

Nick Radge's excellent book presses the point home. I know of a few cases where people have been on a good thing and the sell due to a 5% dip. Crazy.

I know one guy who had literally 800,000 shares in Oxiana bought at a very low price and he sold nearly all of them when they went up 60%.  if he had of held he would be a millionaire. There must have been investors in early on paladin, some of which sold when the price doubled, bet they regret it now.

*2. Know the fundamentals.*

This is related to point 1. You can buy and sell based on technical analysis but get to know, in detail, the company. You may then not make mistake number 1. This means work, time  and analytical knowledge however. If this is not possible then ignore this point.

*3. Stop losses are dangerous* and should not be used on low liquidity companies and very carefully used even where there is high liquidity. 

APG is a classic. I bought these at a good price and watched them nearly triple. Someone decided there were too many traders and sold a reasonable amount of shares to lower the price so he could get more. He/she probably short sold. The price halved as all the stop losses kicked in. I backed up the truck and bought more and I am sure the guy who started the selling made a killing. Look at the chart.


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## CanOz (14 April 2007)

Knobby22 said:


> *1. Don't sell too quickly!*
> 
> Nick Radge's excellent book presses the point home. I know of a few cases where people have been on a good thing and the sell due to a 5% dip. Crazy.
> 
> ...





Post something else Knobby, your numbers of posts scares me!


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## nizar (14 April 2007)

CanOz said:


> Post something else Knobby, your numbers of posts scares me!




So does his avatar!!

But getting a bit more on topic:
Notice how the old adage: Cut your losses short and let your winners run is totally against the way we are naturally psychologically wired as human beings.

Knobby your comment about PDN i was actually discussing it with some family members this morning. The bottom in 2003 was i think 0.007. A 5k parcel then would be worth in excess of $7million today. Did anybody hold the whole way?

I suspect none - or perhaps very few did - because its quite hard to hold onto a winner for that long, unless you are a top trader. But top traders wouldnt have bought the bottom!!
Human nature says to sell it - look in the profit - dont be greedy - leave some $$ on the table - damn PDN hasnt done anything for weeks, look at XHK and HUA fly by! (random codes).

But is there any1 out there that are holding onto losing stocks that have gone from $10 to 0.007 ?? (tech stocks)
In my opinion theres PLENTY
Why?

Because selling at a loss is very hard, its like admitting you were wrong, and of course those champion fund managers who i quoted the other day about worldcom, have the approach of, its never a loss until you sell LOL


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## CanOz (14 April 2007)

nizar said:


> So does his avatar!!
> 
> But getting a bit more on topic:
> Notice how the old adage: Cut your losses short and let your winners run is totally against the way we are naturally psychologically wired as human beings.
> ...




Thought provoking Niz, you know I have absolutely no problem selling after a loss, like when the stop gets hit, but trying to let it run, now theres my challenge. Exits lately have been discretionary, and so far I've picked some nice ones using price weakness, but I have some that still haunt me today.

The other thing too thats worth considering, is that someone holding a stock thats gradually going up, may be tempted to sell and use the gains to fund more positions...something I've also been guilty of. Not in the 7 months though!

Cheers,


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## nizar (15 April 2007)

CanOz said:


> you know I have absolutely no problem selling after a loss, like when the stop gets hit, but trying to let it run, now theres my challenge.




I have the same problem.
Im very ruthless with my stops, but letting winners run.... Hmm.... improvements can be made...


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## nizar (15 April 2007)

Chorlton said:


> Hello All,
> 
> Here's some of my own list (in no specific order) - and apologies if they have already been posted by others.......
> 
> ...





Solid post Chorlton.

_8) Ensure you have enough funds in your account to allow for a string of losses. There is a lot of material written about levels of risk. No more than 3-5% of overall capital per trade to be risked for example. If this level of risk is too small in terms of $ amount for you, then maybe you should question the size of your account, and whether you have enough to trade for the long-term?_

Just to comment on the above, i used to risk 2% of capital per trade, i found it was far too much though. Now i use 1% or less.


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## purple (15 April 2007)

CanOz said:


> First of all i respect your point of view, but i don't agree.
> 
> Research can lie, price action cannot lie.
> 
> ...




well, hypothetically, what if your choice of stocks consistently dip before an uptrend, and you get stopped out consistently? that would erode your capital too. 

just a thought. of course one can position stop losses below support levels etc etc but there is still that minute possibility of stop losses slowly eating away at you.


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## nizar (15 April 2007)

Purple.
I think one has to look at what the purpose of a stop is.
Its to stop loss.
If your stop loss, is in fact, not stopping further losses, than that means you're placing it too tight.

A stop loss should be telling you to exit your position if the price action is as such that you no longer want to be holding that stock ie. the reason you bought is no longer there.

And if you are in a position where if you get stopped out its a disaster for you then you need to review your money management strategy (or start implementing one).

Just my opinion,


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## purple (17 April 2007)

nizar said:


> Purple.
> I think one has to look at what the purpose of a stop is.
> Its to stop loss.
> If your stop loss, is in fact, not stopping further losses, than that means you're placing it too tight.
> ...




yup...agree. my earlier post was a very hypothetical one. if your stop losses keep getting hit, then it is indeed a time to overhaul the whole trading system!!

back to the thread title, i think the biggest trading lesson learnt for me is :

See the Big Picture

it's always important to never let this stock market control one's life. the current bull market that we're in, one can easily spend hours researching the countless uranium juniors to invest in.

need to keep reminding myself of my mission in the stock market - rake in little profits (or big ones if it happens). once i start getting greedy, my vision is clouded and i can't think clearly.


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## tech/a (17 April 2007)

> well, hypothetically, what if your choice of stocks consistently dip before an uptrend, and you get stopped out consistently? that would erode your capital too.




If anyone is even slightly concerned about this situation occuring,it will be because they are trading a theory,or at best a well laid out un tested plan.

It is here that a tested and proven system/methodology with its associated numbers and blueprint give the trader confidence and a positive edge/expectancy.


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## motorway (17 April 2007)

purple said:


> well, hypothetically, what if your choice of stocks consistently dip before an uptrend, and you get stopped out consistently? that would erode your capital too.
> 
> just a thought. of course one can position stop losses below support levels etc etc but there is still that minute possibility of stop losses slowly eating away at you.




Well How are you defining an uptrend?

As a smooth line?

If prices move in waves
Then an uptrend is a series of higher highs and higher lows

Stocks will continually dip in up trends..

It is not that they dip but how they dip that confirms or negates an uptrend.

So part of what makes a stop more effective in giving 







> the trader confidence and a positive edge/expectancy.




Is what part of the trend you are entering.. And how you defining and recognizing a trend..

You can buy the bulges or the those successful tests on the dips.
On a bulge demand is creating supply.
On a dip supply is generating demand.

In between demand generates demand and supply generates supply.
Every dip and bulge is a test of the trend when a test is passed the trend is confirmed.

Stocks dip because buying generates selling there are waves inside waves.



> of course one can position stop losses below support levels etc etc but there is still that minute possibility of stop losses slowly eating away at you




And if you buy as close to that support as possible
The natural movement will mean very few stops being hit even with tight stops. But if they are You probably get a better entry .. If you still want one.

A breakdown of a bullish definition (fall through support) might mean something significant is changed..


motorway


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## purple (20 April 2007)

ha ha ha...sorry, i'm finding it hard to concentrate after coming out of the ASF Joke Thread...who knew money-faced traders could be e-stand up comedians...

Moderators, is there a Stop Loss thread somewhere? don't want to bring this thread too far off topic...


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## The Barbarian Investor (21 July 2007)

nizar said:


> Notice how the old adage: Cut your losses short and let your winners run is totally against the way we are naturally psychologically wired as human beings.
> 
> But is there any1 out there that are holding onto losing stocks that have gone from $10 to 0.007 ?? (tech stocks)
> In my opinion theres PLENTY
> ...




Yep

I've spoken to a couple of people who held CHEMEQ to the end, a friend of the family sold his two Investment Properties (pre WA Boom) to a developer and bought a HUGE chunk of CMQ (never having been mixed up with stocks before) which was touted to be a $30 stock one day

I believe he held on until (very near) the end hoping it would recover


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## theasxgorilla (21 July 2007)

motorway said:


> On a bulge demand is creating supply.
> On a dip supply is generating demand.
> 
> In between demand generates demand and supply generates supply.




motorway,

That was a superb post.  Can you elaborate or confirm if I'm on target with my interpretation?

The higher prices resulting from demand creates supply by attracting sellers...vice versa for supply generating demand.

In between the lower prices which occur due to supply encourages further selling and a rise in prices due to demand encourages further buying?

ASX.G


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## CFD (21 July 2007)

I know you will want to hear it from MW, but yes that is what his teaching say.
Prices rise in search of supply and fall in search of demand.

In between is an interesting bit. I think it's where neither buyer or seller has an advantage and where a fair price is obtained by those who need to trade on the day.


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## R0n1n (21 July 2007)

Here are mine.

1. Never chase a stock that has taken off, wait for it to consolidate or let go.
2. Never buy at whim, gut feeling, angel on my shoulder feeling.
3. Never buy at the opening of the market, wait for 1/2 hour to 1 hour.
4. Never buy againt the trend.
5. Check all the indicators. Volume and RSI are must and check market news.


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## motorway (22 July 2007)

theasxgorilla said:


> motorway,
> 
> That was a superb post.  Can you elaborate or confirm if I'm on target with my interpretation?
> 
> ...




I think this is where an accurate understanding of how the character of price and volume action can reveal the creation , sustaining and termination of trends .

We have to keep in mind that volume traded is not the same as liquidity.
Liquidity defined as the impact of any one  transaction on the subsequent  transactions. That there is a different liquidity for sell orders and buy orders at any particular time and that the context that the action in the moment is occurring in is crucial..


Up trends, downtrends , sideways ( different from nothing )... All in their way crystallize and generate a following

The liquidity for buy and sell orders is very different in a downtrend than an uptrend...

*Large volume can bring about a large movement in price 
or it can simply generate demand or supply*

What really cause large price movements is changes in liquidity

liquidity imbalances.....

Price moves in waves of buying and selling.

When a following is generated... It is then that  a liquidity imbalance is crystallized....

We can look at different time frames
daily weekly monthly
We can look at different magnitudes of moves

But really waves transcend defined time and defined magnitudes.


Accumulation/Distribution ... Think about it buying generating selling , selling generating buying.. waves swinging up and down , bounded , meeting edges

How do We get waves ? Anywhere ?... Ocean ?.... Wind provides energy..
A skipping rope ? Someone has to be holding the rope.

All sideways need not be Accum or Dist it can be just nothing, random movements.

No wind blowing on the water... No one holding the end of the rope...
No waves....

What stands opposite random disorder and  meaningless movements ?
Order.... what creates order ? energy ... what is energy ? Here it is information..

Some sort of information is the energy that creates meaningful waves
When someone is holding the rope they can manipulate it ,make it move..

In a range buying generates selling and selling generates buying
When there is some sort of information , energy .When  someone picks up that rope..
Movements  then take on some sort of order.. 

We get waves.

A nothing range becomes accumulation or distribution
Positions are taken and waves of activity that will gather a following are being generated. 
How ? By change of ownership and crystallizing of sentiment...

Liquidity imbalance is built up... Buying starts to generate more buying. A range also build contigency ( All those who will buy or sell when price does move)  Accumulation gives way to markup. Then Ease of movement
No longer need volume to produce  markup... Inventory just gets a new price ticket.
Waves of buying and selling then unfold very differently
higher highs higher lows
selling waves have little ( in comparison ) following

But new information is always flowing like the wind 

At some stage prices reach an overbought , top heavy state... 
Waves have overreached like  waves that rush too far up the shore
With energy spent.. It just flows back ..
We with mkts though have two waves , selling and buying.
Waves can just rollover and subside like on the beach or they can violently meet with the other side.

In every trend there are ranges
and in ranges there are trends
look at all time frames , all magnitudes...

ranges build trends which then  terminate back into ranges

buying generates selling----> until a liquidity imbalance
prices jump out of the range gathering a  following
buying generates buying
Sellers place limit orders above the depth
A series of higher highs and higher lows

waves of buying and selling a clear following.

liquidity imbalance is finite
markup over... Range.. Buying generaties selling .selling generates buying.
Only way you can have a range.. Information energy creates order
Range again involves change of ownership crystalizing of sentiment..
( Information can also be of various kinds . Some real knowledge to just someone  watching the price action )

Look at different magnitudes
Look at different time frames

Look for the trends and ranges on different time frames
Look for the character of bars and waves ( a series of bars only make up one bar on a larger time frame )

Look for where the liquidty imbalances are being created...
Look for serious information driven accumulation and distribution.

The most important change of ownership is 
between weak and strong hands
different chracteristics at bottom and top of waves

Strong hands are forward looking
weak hands are backward loooking
one is early and on time ,buying or selling  for the next move
the other is always late buying or selling  the past move.

If you see a range or a trend in any time frame
look at the context from the perspective of the  other time frames...

Range or trend... both are made up of waves of buying and selling, demand and supply , that build and gather a following..

Volume will tend to define where the followings start and end..

motorway


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## motorway (22 July 2007)

Following ....

Everyone is following....Something..

When We buy We don't want too much following
We want some sellers
After We have bought 
We want everyone to follow after
We want all buyers esp when it comes time to sell.

Everyone else wants the same
We Buy something because We are following a signal of some type
A signal generated by the action of others
Others in turn follow along after Us..

Hence prices move in waves
that gather followings

This has a life cycle.

Everyone is trying to manipulate price in some way.


motorway



> "For the savvy market player, knowing when to jump on the bandwagon is only half the battle won. You must also know when to jump off "
> 
> Imagine a bandwagon rolling slowly forward. Music is playing. A few people on the wagon are having the time of their lives. The sweet music begins to attract many people standing by the side of the road. These people unable to resist the pleasant sounds, rush to join the party.
> 
> ...


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## hatrader (22 July 2007)

Here is a original one.....

---  Make sure you have a STEADY hand on the mouse!---

Crikey, after a heavy celebration the night before, I had the platform loaded ready for a CFD buy trade, hand on mouse ready for the appropriate price when the  "twitching" prematurely entered me into the trade. 

I was lucky and got out without loss.


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## CFD (22 July 2007)

And another ...
One should never try and second guess the response!


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