# Learning how to trade – an alternative to paper trading



## dutchie (3 December 2005)

These are suggestions on how a person can learn how to trade.

1.	Read information from the ASX (www.asx.com.au) – heaps of excellent information plus company information, data etc etc. Attend any free seminars that are available.

2.	Join forums like this one and read, read, read.

3.	Use the SEARCH function on the forum. The question you have has probably been covered already.

4.	 Get a few books on trading (Bedford, Tate, Guppy et al) (again search the forums for other peoples opinions on the best books). Buy them or check out your local library.

5.	Take notes to help clarify information you have gathered.

6.	Search the net for abundant information (you nearly don’t have to buy any books). Nearly every site will give you a new snippet of information, which adds to your education (even the commercial ones).

7.	Sign up for free reports, stock tips, articles, news – DON’T buy or sign up for anything yet.

8.	Join a local trading group/club if available. Talk to people and discuss what you have learnt and what they know (of course you still need to assess the information).

9.	Start developing your own system – how to be profitable (expectancy), how to select the trade, how to determine the amount to be invested, how much to risk, how to enter the trade, how to manage the trade, how to manage the risk, how to exit the trade and how to spend your profits (think positive!)

10.	Look at derivatives (options, warrants, indexes etc) to broaden your education.

11.	Do this for at least 6 to 12 months (don’t be impatient to start trading – all the good opportunities will still be there).

12.	Paper trade if you think you will benefit from it.  Opinion is split as to the benefits of paper trading but I think it is up to each individual to decide.

An alternative to paper trading:

This requires an amount of at least  $1000 - $2000.

THE NAME OF THE GAME IS TO STAY IN THE GAME  (PROTECT YOUR CAPITAL!!!).

a)	Invest in “Blue-chip” stocks less than $10 using the skills you have learnt in the last 12 months.

b)	Invest $100.00 or so at a time (10 x $10,  12 x $8,  16 x $6, 20 x $5,  25 x $4
50 x $2).

c)	Brokerage will kill you -  $20 in and $20 out (total cost of buying and selling a share $40) but you will get in up to 20 trades.

d)	This is the cost of your education and is cheaper than buying a system black box or attending a $4000 course.

e)	You will feel the pain of losing real money but you will have gained some great knowledge about real trading.

f)	Analyse where you went wrong or why you succeeded.

g)	Ask for help if you don’t understand where you went wrong.


Good trading!


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## tech/a (3 December 2005)

Question/s

(1) If emotion werent a factor in trading would paper trading then be acceptable?

(2) If emotion werent a factor in trading would there be more people trading profitably?

(3) Is it better to eradicate the problem rather than fight it or pretend its not there?


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## Bronte (3 December 2005)

Nice post dutchie....
Some good info. here


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## It's Snake Pliskin (3 December 2005)

Dutchie,

Good thread!

With paper trading you cannot accurately mimick the correct purchase price or selling price of a stock. 

Snake


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## happytrader (3 December 2005)

tech/a said:
			
		

> Question/s
> 
> (1) If emotion werent a factor in trading would paper trading then be acceptable?
> 
> ...




Nice thread Dutchie

Very valid points Tech. With these thoughts in mind there are some nice articles on www.trade2win.com such as 'To Think of not to Think':The traders Dilemma by Jake Bernstein, 'Pulling the Trigger Q&A by Alan Farley.

Heres an inspiring story and strategy which I personally use.

What I learnt losing 60,000 pounds in my first year as a full-time trader
by Malcolm Robinson.

During my first year as a local (independent trader) on the floor o LIFFE, I bought and sold 8804 FTSE futures contracts, about 40 contracts per day on average. 

The result was a loss of 61,620 pounds or 267 pounds per trading day. I was profitable on 55% of the days with an average gain of 1009 pounds, my average losing day was 1780. My biggest one day gain was 7730 pounds and my biggest loss 12,426 pounds. As you can probably imagine, this was a difficult time for me.

I was trying to work out how to make money consistently.

It was the consistency that seemed so hard to find. As you can see I was having a regular expeience of makin money, what was killing me were my losses.

It seemed that every time I got ahead by 5-6000 pounds ovr a period of a week or two, I would lose it all and a few thousand more in the space of a couple of days.

At the time I was too unhappy with my performace to be willing to spend any time analysing my results. If I had I would have discovered that during this period all I needed to do to go from a loss of 61,620 pounds to a small profit would have been to avoid just 10 trading days.

Those 10 days cost me a total of 69,169 pounds.

At the end of this period I was so frustrated, fed up and stuck that I decided to quit trading and return to a more secure career.

It only took me a few weeks to abandon this plan and return to trading. I felt sure that I had the raw talent to become a consistently successful trader, what I needed, I reasoned was some support.

Support to stop me from having the huge losing days that were crippling me financially.

I approached a firm I knew that backed traders on the floor and they agreed to back me with 20,000 pounds of trading capital. We would split profits 60:40
and I was to set an initial daily loss limit of 500 pounds.

If I hit my 500 pounds limit the firms floor manager would come and tell me to go home. The third day trading I lost about 3500 pounds and nothing happened, no one came to ask me to stop trading.

I felt very foolish, but continued to trade for the remainder of the week while avoiding any contact with the floor manager. The following Monday (the weeks losses had totalled about 5000 pounds) I got a message to meet the director with whom I had; made the agreement (it transpired he had been away the previous week).

I was sure that he was going to say the deal was off. Instead to my surprise, he told me how important it was that he could trust me.

He needed to know that when the market was volatile he could trust me not to be racking up big losses. He suggested that I start afresh. Needless to say I was both relieved and grateful.

So I went back to the trading pit that morning with the determined intention to not lose more that 500 pounds.

The next two weeks turned out to be one of the toughest periods of my trading career and one of the most rewarding. Stopping when I was down was hard.

I realised that what had been at the root of my large losses was my inability to accept losing at all. To me losing was unacceptable. 

Such was my intolerance for loss that I lost for ten consecutive days. But as the days progresses, even though I continued to lose 500 pounds a day. I found my mood lifting.

I actually started to feel OK about losing as long as it was within my limit. At the end of this 10 day period of losses a seeming miracle happened; I started to make money.

My target was to get to +1000 pounds and then not give back more that 20% of my gain. So when I had a profitable day I was making between 800 pounds and 2000 pounds, for an average of about 1200 pounds. Not only did I start to make money, I did so for 15 days in a row, three entire weeks without a loss.

This marked the beginning of a new era of trading for me. In retrospect, I believe that I had been trading scared, scared that I was really a loser. The two weeks of rigidly sticking to my loss limit caused me to revaluate myself.

I started to feel good about myself for sticking to my limit. Before it was bad if I lost money now it was only  bad if I lost more than my limit. Before I never knew whether I was going to make 1000 pounds or lose 5000 pounds, now I knew that the worst case was a loss of 500 and that was OK.

I started to see that sticking to my trading limits was a sign of strength and my confidence started to rise. Looking back at my first years losing streak, if I had restricted my losing days to 500 pounds my loss of 61,620 pounds would have turned into a profit of 83,525.

Not only that, I think that had I been sticking to a loss limit during that period, my confidence would have been that much greater and my percentage of profitable days would also have been higher.

Scared money never wins, as the saying goes. If we are scared, what are we scared of?

'Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. 

It is our light, not our darkness that most frightens us. We ask ourselves: Who am I to be brilliant, gorgeous, talented, fabulous? Actually, who are we not to be? You are a child of God. Your playing small doesnt serve the world. There's nothing enlightening about shrinking so that other people won't feel insecure around you. 

We are meant to shine, as children do. We were born to make manifest the glory of God that is within us. It's not just in some of us, its in everyone. And as we let out own light shine, we unconsciously give other people permission to do the same. As we're liberated from our own fear, our presence automatically liberates others' - Nelson Mandela

Cheers
Happytrader


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## tech/a (3 December 2005)

There are 6 ways I know of to eradicate emotion in trading.

Individually or combined (depending on individual circumstance) emotion I believe can be totally eradicated from the equation.

(1) Dont trade if your under capitalised. If your nett worth is $5000 and you commit this or even 50% of it to trading you'll watch every tick and make emotive dumb decisions. If you have a nett worth of $500K and you trade $50k---its the equivelent of our undercapitilsed friend trading $500.*Greed*

(2) Dont trade excessive parcel sizes. If a move in one of your positions is enough to cause stress or an adverse move in your portfolio does the same chances are your trading to larger parcel sizes.*Greed*

(3) Understand Leverage and dont leverage beyond your means.10x CFD leverage means 10x potential loss.*Greed*

(4) Trade mechanically and understand what makes a trading method profitable.Understand its parameters and be sure your tested method stays within those tested.*Fear*

(5) Understand that standing aside from the market is in fact a position.*Fear and Greed*

(6) Profit is the greatest confidence booster and emotion leveller.Be quick to sell losers and slow to sell winners.Holding a portfolio of 10 stocks all 20 to 200% in profit eradicates the fear factor. *Fear*


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## Smurf1976 (3 December 2005)

Snake Pliskin said:
			
		

> Dutchie,
> 
> Good thread!
> 
> ...



Why not?


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## kaveman (3 December 2005)

Indeed the paper trading results may not be exactly the same as real trading entry and exit prices, but for the purposes of testing and if you are sensible and paper trade the worst case (buy high, sell low) you can only give the system some measure of worth


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## tech/a (3 December 2005)

Kave.

Im afraid Paper trading cannot give enough data to be able to say a method has been tested thouroughly enough to have a confidence level.

For me I need 20000 portfolio tests of 10 stocks in each portfolio.
Hardly possible from paper trading.

I'm sure you can see the difference.


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## It's Snake Pliskin (3 December 2005)

Smurf1976 said:
			
		

> Why not?




Because when you place an order you may not get your chosen price even when buying at market - the same goes for selling. With paper trading how do you know what price you are going to get if it doesn't go throught the system? 

Sorry, I think a bit too deeply about little things. 

Snake


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## It's Snake Pliskin (3 December 2005)

tech/a said:
			
		

> Kave.
> 
> Im afraid Paper trading cannot give enough data to be able to say a method has been tested thouroughly enough to have a confidence level.




I agree!


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## It's Snake Pliskin (3 December 2005)

tech/a said:
			
		

> Question/s
> 
> (1) If emotion werent a factor in trading would paper trading then be acceptable?
> 
> ...




1. I'm not sure what you mean by acceptable. To whom or what? The propensity of fundamental investors to prophesise would be more commonplace I feel.

2. Yes.

3. Yes.


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## RichKid (3 December 2005)

Excellent thread Dutchie, thanks for starting it, brings a lot of things together, I'm getting a fair bit out of it.


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## Milk Man (4 December 2005)

Snake Pliskin said:
			
		

> Because when you place an order you may not get your chosen price even when buying at market - the same goes for selling. With paper trading how do you know what price you are going to get if it doesn't go throught the system?
> 
> Sorry, I think a bit too deeply about little things.
> 
> Snake




I just use buy and sell on open. I figure it will even out over time. You probably wont get the open price very often in real life though.


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## happytrader (4 December 2005)

Milk Man said:
			
		

> I just use buy and sell on open. I figure it will even out over time. You probably wont get the open price very often in real life though.




Just curious Milk Man

Is this your paper trading strategy or your real life trading one?

Cheers
Happytrader


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## Milk Man (4 December 2005)

happytrader said:
			
		

> Just curious Milk Man
> 
> Is this your paper trading strategy or your real life trading one?
> 
> ...




Just paper. Why, is there some flawed logic?


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## happytrader (4 December 2005)

Milk Man said:
			
		

> Just paper. Why, is there some flawed logic?




No its not flawed logic if it is working for you with the stocks you trade.

As I trade the big institutional bluechips I wait for 'them' to make the moves. 
Humans are creatures of habit and institutions are no different.

If you want to know when they make their moves look on 1/2 or hourly charts. Its terribly boring but very accurate. Save yourself time, effort, stress and money.

Cheers
Happytrader


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## Happy (4 December 2005)

With access to market depth

On 30 Nov 2005, at 10:25 you decide to enter AAWWPP ‘Flag Trade’

Refresh screen and there is AAWWPP for example Buy $2.86 Sell $2.87
You say to yourself yes I can buy 300 shares up to $3.00 (conditional order)

At 10:27 you refresh your market depth screen and there is Buy $2.87 Sell $2.88
You make a note: Got filled 300 shares at $2.88

Or 
At 10:27 you refresh your market depth screen and there is Buy $3.02 Sell $3.05
You make a note missed the trade

And it’s all to it, if trade is missed more often, make wider limit, use slower moving stock

Or don’t paper trade. (This one sounds good!)


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## It's Snake Pliskin (4 December 2005)

Happy said:
			
		

> Or don’t paper trade. (This one sounds good!)




So Happy are you saying you don't paper trade?


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## It's Snake Pliskin (4 December 2005)

Milk Man said:
			
		

> I just use buy and sell on open. I figure it will even out over time. You probably wont get the open price very often in real life though.




Milkman,

Do you buy and sell in the first 30 minutes of the market - 10am onwards?

If so what is the rationale for that? (It's not flawed, I'm just curious)

I never buy in the first 30 minutes. 10.30 onwards if the opportunity is there. If not I wait for it. If it's not there I don't trade. (part of the plan)

Snake


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## Julia (4 December 2005)

I simply decide how much I'm prepared to pay for a stock and place a conditional order.  If it doesn't fill today, then it probably will tomorrow, or if I really want it  on the basis that it doesn't look at all like reversing, I might adjust the price.

Is this attitude peculiar to investors like me who are essentially buy and hold investors?  Perhaps I'm missing something,  but if you are looking to make a profit (aren't we all?) aren't you going to ensure you buy a stock when it's in a downturn in order to maximise your profit?

e.g. if CBA has traded in the range $38 - $41 in the last three months, wouldn't you place a conditional buy order for significantly less than $41 and simply wait for a day like we had last week when everything dropped substantially?

If you just decide to buy/sell at market open, surely you're leaving yourself open to all sorts of price variations?

If my logic is flawed I'm sure someone will point it out to me.

Julia


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## It's Snake Pliskin (4 December 2005)

> If you just decide to buy/sell at market open, surely you're leaving yourself open to all sorts of price variations?




I agree!


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## tech/a (5 December 2005)

Julia said:
			
		

> If you just decide to buy/sell at market open, surely you're leaving yourself open to all sorts of price variations?
> 
> Julia




If your trading in a short time frame then this could have an effect.
There are cases where if you exited at open after a signal the day before the price gaps up and the same for the buy side where the day before was a buy signal and open gaps down.Often you'll notice a levelling of good and not so good fills.
If your trading medium to long term small variations will have little bearing on the total trade.


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## Milk Man (5 December 2005)

Snake Pliskin said:
			
		

> Milkman,
> 
> Do you buy and sell in the first 30 minutes of the market - 10am onwards?
> 
> ...




I just use open for paper/backtests to be consistent. I dont trade as such yet so all ive ever done is ring the broker and tell them I want x dollars of abc. My logic might well be wrong because I dont buy/sell often enough yet to make any conclusions.


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## Lyehopper (6 December 2005)

Milk Man said:
			
		

> I just use open for paper/backtests to be consistent. I dont trade as such yet so all ive ever done is ring the broker and tell them I want x dollars of abc. My logic might well be wrong because I dont buy/sell often enough yet to make any conclusions.



Milkman...DUDE! we gotta change that! and quick.  Brokers are just blood sucking vampires man!  :batman:  You need to open an online account and start trading more actively.  Paper trading is worthless IMO.... You gotta put the real bucks on the line.  Feel that emotion, make those hard decisions ..... with real dollars to ever be a good stock trader.  

If you want to trade the US markets I can help you.... So far.... I'm clueless about the Aussie market.... But I'm learning.  It would be cool to be able to trade the OZ market in the evenings here if I want to.  What time does your market open.  How many stocks are listed?  What's the time difference anyway?  It's 5:00 pm here.... the markets closed an hour ago.


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## Milk Man (6 December 2005)

Its ok, when the trading starts ill be using online brokers and CFDs as well. I want to do forex but still learning about that. Its only been Buffet style stuff until now. Trading capital; coming soon to a market near you  (tied up ATM). I could either buy 1 or 2 stocks right now or a portfolio that would get massacred by brokerage (even at $20 each way). I got some weaners to go soon so maybe then. Probably start with a mechanical system, then low risk discretionary on CFD (like Nick Radge), then forex and maybe commodities. You can buy my share in a dairy farm; then ill have heaps of capital  .


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## zuluwarrior08 (30 June 2007)

dutchie said:


> These are suggestions on how a person can learn how to trade.
> 
> 
> An alternative to paper trading:
> ...




Dutchy without realising Ive stumbled across this thread and it is exactly what Im doing.

Started with $1000 using cmc markets CFDs, so that I can get exposure to a 10k portfolio fully leveraged. This has taught me to be extremely money management conscious as I dont have a lot of room if I get it wrong.

I spose Ive thrown myself in the deep end, but its really taught me that I need to take high probability trades, and if Im wrong, i need to get out quick and cut losses.

Ive been using a 5% max loss per trade, which really incorporates $10 to get in and $10 to get out. $20 commision+$30 movement in stock=5%

Ive found this site invaluable in my learning experience, so thanks for all your guys wisdom and experience.

heres to happy and fruitful trading in the future!!


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## tech/a (30 June 2007)

zuluwarrior08 said:
			
		

> so that I can get exposure to a 10k portfolio fully leveraged




So your fully leveraged at 10:1



			
				zuluwarrior08 said:
			
		

> Ive been using a 5% max loss per trade,




At 5% thats 50% of initial capital.
If your saying $50 then you cant be using leverage.
Me no understand???


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## zuluwarrior08 (30 June 2007)

Im risking 90-100% ($50) of my margin, so 5% of a $1000 position =$50

therefore really Im risking a max loss of $50 on a 1k position, but ive only put up $50 to get that position. 

example buy 50 ANZ @ $29.00 = $1450 value, and ive put up a 3% margin ($43.50)
stop is set @ 28.40 for a max loss of $30 + $20comm. 

See why I really have to look at taking high probability trades. It just means that my position sizes are smaller, as i like to put my stops in places below significant resistance.so my position size is determined by my stop placement.

I guess if i can protect this small amount of capital useing such high leverage, i must be getting ok at the game. once ive paid for my experience and felt the emotion of losing, and actually learning to remove emotion and forming a good system with a bit of experience behind me, i will be on my way.

Im happy to hear any suggestions from everyone, as every little bit helps.


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## WTBD (1 July 2007)

Hi Zulu

Purely my personal opinion and not to be interpreted as anything other than that.  

You have the right idea but few comments below. 

Just saw Dutchies thread re real time trading. Great thread/advice to novices and well worth using correctly to replicate actual sizes to be taken per your trading plan. 

Paper trading also good if just starting out so long as you write notes and analyse why entry and pyramiding and exits and GSLO placing etc and back test methodologies/reasoning. 

Back to Dutchies - Re actual small trades with provider suggest avoiding marketmakers and go to DMA with GSLO and be careful of stops being too close or you will be stopped out of the market and be aware of dividend payments due.  

Game is to stay in the market with good risk mgmt and sound back tested methodologies that suit you as an individual so you need to be v honest with yourself and keep being honest to yourself- forget all the noise surrounding you.   

For example If blue chip like ANZ it has v volatile moves daily as institution traded but trending bull for many years now weekly monthly. So then if you know share/cfd from research and history and charting and it is blue chip then chart its recent past lows and new highs and determine stop based on these and other indicators that suit you/your trading system both mechanical and above all use your trading plan to the letter but do modify both as required/experience teaches and then backtest again.  

Above is N/A to daytraders as time-frame too long but if you are trader who is more short/medium in CFD's then follow the trend over a few days/weeks and run with your profits but use GSLO trailing stops.  Cut your losses asap if trend against you on entries and reenter on either buy/sell signals or if trending and you r still unsure based on your indicators use small position for double entry and test the market. Your entry point is not as important as the way you enter.  Adding to winners is more important and taking losses quickly and increasing winning positions and realising profits before tops if this is in your trading plan or whatever your plan tells you regarding profit taking.  

Buying low and selling high is not the game since the market is continually changing but there will be a trend pattern which you must identify with individual stocks if not purely day trading. Buying on the way up and selling on the way down works better for risk mgmt and profit taking and capital preservation and growth.

Also try using exit signals as buy signals in reverse if you're not doing this already.  Again start small and slowly add to your position as the price confirms the trend.  There is no holy grail and no matter how complex some traders try to make entry and exit signals on their charts and mechanical trading systems - keep it as simple as possible. (No offence to the purely mechanical traders as this probably suits those who work in other professions and trade for a hobby)

Losing money in the markets is a given and can knock most out of the market before they can recover due to poor $ planning and mgmt skills and emotions but making those losses much lower than your profits taken is key to successful trader.  If long term then you are really investor not trader although I see this argument on another tread some time ago and its rather a mute (egocentric) point as anyone in any business who is increasing their wealth and capital growth in any form over more than 1 yr consistently is in my opinion clearly successful for themselves unless money used/profits are less than the bank rate or managed fund return or interest debt due on mortgage or credit card etc or on another tack they may just be enjoying the journey and making a few dollars more along the way.

Great trading - "successful trading is experienced through hard work and long hours like any successful business - the difference is in the size of the takings, but the model remains the same".


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## zuluwarrior08 (2 July 2007)

Thanks for the responses. I'll try and keep u up to date on what lessons I'm learning, and also I wont be surprised if I come here, describing a situation to you all and maybe help in deciphering a lesson out of it....It'd be good to see everyones opinions on what lessons can be learnt from certain situations


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## Trembling Hand (2 July 2007)

zuluwarrior08 said:


> Started with $1000 using cmc markets CFDs, so that I can get exposure to a 10k portfolio fully leveraged. This has taught me to be extremely money management conscious as I dont have a lot of room if I get it wrong.
> 
> I spose Ive thrown myself in the deep end, but its really taught me that I need to take high probability trades, and if Im wrong, i need to get out quick and cut losses.
> 
> ...



zuluwarrior08
Without really knowing what you are doing I would guess that you may run into trouble with a bit of false logic on the max 5% loss per trade. If you have more than 1 position on your account is exposed to a high probability, if you are trading overnight, of taking a real nasty hit which could very easily take a 50% or greater loss in one day. 5 stocks gaping down 3% or more on CMC would hand half your capital to CMC in one day. Please be careful $1000 does not leave you much wiggle room


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## >Apocalypto< (4 July 2007)

tech/a said:


> There are 6 ways I know of to eradicate emotion in trading.
> 
> Individually or combined (depending on individual circumstance) emotion I believe can be totally eradicated from the equation.
> 
> ...




*I think every person new to trading should print that out and read it repeatedly*

Tech that was so true it was as if I was reading a text book.

Great post.

Beginners take heed of everything in techs post.


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## zuluwarrior08 (22 July 2007)

Ok so heres an update.
Over the last 3 months Ive been trading, Ive completed a total of 53 trades, with 3 current open positions. Thats an ave. of almost 1 per day.

Ive had 12 winners and 41 losers.
my ave winning trades were $83.75, and losing trades $49.37

total loss of $1019

This was paying a commision of $10 per entry and $10 per exit.
Total commision paid was $1060

As you can see, commision was a killer. 
One of the biggest lessons I learnt was not trading my plan. as you can see the average loss was 49.37. this was due to gapping on the open past my stop and it not getting filled (maybe GSLO should have been used?) on a few trades, not moving stops appropriately when pyramiding positions.

The ave winning and losing trades included $20 commision per trade.

Ive pulled out the biggest winner, as this is the kind of thing I would like to aim for. Ill post a chart later this arvo. BHP, initial entry 90 @ ave.$32.99,exited @ $39.68 

I was fully leveraged, usually paying a 3% margin (around $35) for a 1k position size.

Ave position size was 1k.

Ill use this forum as an analytical tool so stay tuned for coming analysis of my trades and how we can maybe benefit from them in the future. Any feedback is welcome. Cheers and good trading


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## tech/a (22 July 2007)

My feedback from the info given.

(1) Trading to often (to many trades),Hence too much costs
(2) With around a 25% win rate Id say your attempting to pick bottoms--*stop* trying to do that.
(3) Without knowing how you would have gone had you traded to plan--it is possible that your plan is flawed.--obviously the one you used (The one that wasnt the plan) certainly is.
(4) Not letting profits run.
(5) Over leveraged--you *WILL* blow up!

Other than that your Luckily still in the game!

Step back and consolidate ideas.


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## zuluwarrior08 (22 July 2007)

Thanks TA

Heres the BHP trade which was executed perfectly IMO. if only all trades could run like this.

Entry was @ 1, with additions to position at 2 and 3. The signal to buy was the break/s of previous highs (grey) with stop placed at the blue line below support. exit was at 4- weakness at the large black with high volumes.

Any comments?


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## Trembling Hand (22 July 2007)

tech/a said:


> My feedback from the info given.
> 
> (1) Trading to often (to many trades),Hence too much costs
> (2) With around a 25% win rate Id say your attempting to pick bottoms--*stop* trying to do that.
> ...




Yes TA, I agree a 25% win rate suggest that your trading plan (the good one as well as the one you actual did) has not got an edge on the other traders in the market. You need to try and eliminate some of the bigger errors, then see if you have a trading edge. Well done for keeping and analyzing your results so far and posting them.


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## zuluwarrior08 (22 July 2007)

This is another trade that Id be aiming for repeatedly.

I missed the initial breakout at the green arrow, entered at the red. exit was at the second red arrow.

To clarify what Ive based the trade on in terms of tech A and fund A, ive used a ratio totalling 5 to determine why ive entered the trade and based on what ie I have a long position in shares at 0/5 tech/fundamentals- ie based purely on fundamentals. Both this trade and the BHP trade were based on a (50/50) 2.5/2.5 tech/fund ratio. most of my losing trades (20 out of 41) had a 2/3 tech/fund ratio.

7 trades taken were 4/1 tech/fund, with 5 being winners.

I think Im more succesful at technicals, plus its way more work doing the research for fundamentals. What does everyone think about this?
Keep in mind this is in the begginers thread so best comments will help all of us newbies. thanks for the feedback


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## Trembling Hand (22 July 2007)

Trading a stock with CFDs based on fundamental analysis is going to be tough. Short-term moves are not based on Fundamentals, the market moves on sentiment in the short term. 3% margin trading on fundamentals is crazy. 3% move in BHP can be one days move, the fundamentals have not changed in one day while you have lost all of your margin!!!!! There is nothing wrong with Fundamental analysis but you have no wriggle room with CFDs.


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## theasxgorilla (22 July 2007)

Julia said:


> Perhaps I'm missing something,  but if you are looking to make a profit (aren't we all?) aren't you going to ensure you buy a stock when it's in a downturn in order to maximise your profit?




This is a bit of a cheeky question...how do you determine a share is in a downturn?  Do you look at a chart?


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## wayneL (22 July 2007)

trembling Hand said:


> Trading a stock with CFDs based on fundamental analysis is going to be tough. Short-term moves are not based on Fundamentals, the market moves on sentiment in the short term. 3% margin trading on fundamentals is crazy. 3% move in BHP can be one days move, the fundamentals have not changed in one day while you have lost all of your margin!!!!! There is nothing wrong with Fundamental analysis but you have no wriggle room with CFDs.



As a fellow pedagogue, I know you would be interested to know that one doesn't have to use full leverage with CFD's. There is no reason one couldn't use CFDs for fundamental trading. 

It is a similar principle to investors in commodity futures. The margin is a small percentage of the face value, but you can still invest unleveraged. Simply have a cash reserve equal to the face value of the contract or CFD in either a CMA or brokers account.

It's not what I would do (and I don't like CFDs either), but it could be managed that way.


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## Julia (22 July 2007)

theasxgorilla said:


> This is a bit of a cheeky question...how do you determine a share is in a downturn?  Do you look at a chart?




Not a cheeky question Gorilla.  I probably should have said "dip" rather than "downturn" and - as I've previously said - I go for mostly blue chips which have a long record of growth and good dividends.
Yes, for something I haven't bought before I'll look at the chart.
But if I'm adding to an existing position I'm seeing the price every day and it's not exactly rocket science to see a buying opportunity with a temporary weakness.
There's nothing complicated about my approach so if you were looking for some fancy technical stuff I don't have it!


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## Julia (22 July 2007)

tech/a said:


> If your trading in a short time frame then this could have an effect.
> If your trading medium to long term small variations will have little bearing on the total trade.



Well, if a stock is ranging from, say, $30 - $35, if I buy a mere 1000 at $30 rather than $35 then I'm $5000 ahead to start with.  I don't think that's immaterial when choosing an entry point.


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## Trembling Hand (22 July 2007)

wayneL said:


> As a fellow pedagogue, I know you would be interested to know that one doesn't have to use full leverage with CFD's. There is no reason one couldn't use CFDs for fundamental trading.
> 
> It is a similar principle to investors in commodity futures. The margin is a small percentage of the face value, but you can still invest unleveraged. Simply have a cash reserve equal to the face value of the contract or CFD in either a CMA or brokers account.
> 
> It's not what I would do (and I don't like CFDs either), but it could be managed that way.




Yep very true. I guess if you were to use fundamental analysis that is exactly what you would have to do. You would also have to think of the trade in a longer time frame I think. Just because its got good fundamentals does not mean its going up this week, or this month!!! With that in mind you would have to reassess your stop placement.

zuluwarrior08 I think it is important that rather than saying this doesn't work for you (fundamental analysis) it maybe better to think how can I make this work i.e. Reduce risk buy decreasing initial entry size. 25% win rate is not great but I suspect your stops and risk per trade are not suited to fundamental analysis. Its pretty hard to figure out what you should be doing when you start but if fundamental analysis is attractive to you give it a good shot before giving it away. Because success normally comes when your own insight to the market (in you case TA & Fund A) is fitted to a trading plan that protects you when you get it wrong.


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## theasxgorilla (23 July 2007)

Julia said:


> There's nothing complicated about my approach so if you were looking for some fancy technical stuff I don't have it!




I was looking for *any* techical stuff...for moment there is sounded as though you were beginning to sway you to the dark side


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## It's Snake Pliskin (23 July 2007)

tech/a said:


> My feedback from the info given.
> 
> (1) Trading to often (to many trades),Hence too much costs
> (2) With around a 25% win rate Id say your attempting to pick bottoms--*stop* trying to do that.
> ...




Tech, it's "too" not "to", and "too many costs". Good comments though.


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## tech/a (23 July 2007)

Thanks *Snake* its actually s-l-a-c-k!.

*Julia*
$35----$30 is around 15%---.

If trading short term then that 15% could well be your entire profit.
Longterm your $30 stock could well go to $60 at which point the money has been earned from time IN the trade not TIMING the trade!
The Two Styles are different.

You are correct in saying "Its not Rocket Science" and for longer term trading it doesnt have to be.From our discussions over time I'm sure you'd agree that short term finessing both Fundamental and technical is at least entry level science!


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## wayneL (23 July 2007)

tech/a said:


> Thanks *Snake,* it*'*s actually s-l-a-c-k!. <= No full stop required


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## tech/a (23 July 2007)

I see I've made my point again.

Jetlag!


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## wayneL (23 July 2007)

tech/a said:


> I see I've made my point again.
> 
> Jetlag!



I'll have to watch my own bloody punctuation now.


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## Julia (23 July 2007)

theasxgorilla said:


> I was looking for *any* techical stuff...for moment there is sounded as though you were beginning to sway you to the dark side




Not quite sure exactly what the "dark side" constitutes?  ??
However, there are plenty of successful fundamental investors who would never look at a chart at all.  

Do you think a technical approach is mandatory to successful investing, Gorilla?


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## Trembling Hand (23 July 2007)

Julia said:


> Do you think a technical approach is mandatory to successful investing, Gorilla?




Oh! Not that old Gem again!


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