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Crystal ball
Unfortunately, no one has a crystal ball, and any strategy in the real market, for some periods (sometimes long periods), may behave differently from the backtest and it is up to you to decide if you want to continue trading it or to take it off the market definitely (or simply suspend it, continuing to monitor it in paper trading, until it starts again to perform as per your expectancy).

Skate.
 
Take the good with the bad
With a weekly strategy you have to hold the position up to week even when the price falling rapidly. With a weekly system you have to stick to the plan even if it means a bigger loss (I never override my strategy) Keep the system as simple as possible, validate it (robust backtesting) and trade it.

Skate.
 
Money Management
It’s about how we proportion the amount of money set aside for trading, deciding what dollar value you want to place on each trade & it should be in relationship to the frequency of your trading style relating to your trading plan. You can divide your capital into five, ten, fifteen or twenty equal amounts. I personally divide my capital into 40 equal parts.

Trading Account
This is the account you have money in to trade & 'lose'. Trade an account balance that wouldn't be worrisome if you lost it all, that's when you will have confidence to take a trade & the next while being able to sleep well at night.

Start out small
Start out trading small amounts & build up your resistance to the pain of losing, when trading, learn to be the best loser you can possibly be.

Skate.
 
When is it safe to trade ?
The market has three states of movements, trending upward, trending downward or trending sideways. The ideal time to trading is when the Index you are trading is trending upward.

Index Filter
An Index filter is the most common way to gauge if the market index is moving higher or lower and most filters comprise of a simple moving average set against the index and time frame you are trading.

Skate.
 
The index filter
An index filter is your safety net, it will keep you from trading when the index falls below a simple moving average by turning the filter off. When the Index filter turns off it should also prevent your strategy from generating any new buy signals. (this is essential)

The flexibility of an Index Filter
Another feature of an index filter is that when the index filter turns off you can have your stop loss tightened so you exit your trade sooner, much quicker than when the index filter is on. This will lock in profits or stop you losing more money if your position is under water.

Locking in profits
Locking in profits is the endgame, it's hard to watch profits evaporate, well it is for me, so don't let it happen to you. Don't worry there are times when the **** will hit the fan that will be unavoidable, that's just how it is sometimes.

Skate.
 
How does an Index Filter operate ?
When an index filter turns off it has the ability to protect you against larger losses securing and protecting your capital. If the index filter falls below a pre-set simple moving average the stoploss shortens to your preset level of pain generating sell signal sooner than when the index filter is on.

One of my first questions
Index filters are not really difficult to understand & code, it was one of the first questions I ask joining Aussie Stock Forum (ASF) back in 2013, such a long time ago.

Skate.
 
Permanent feature
An Index filter should be a permanent feature of any good strategy & when the index drops it’s a time to take notice, it’s time to watch for sell signals.

From this point, pray
After placing a buy order all you can do from this point is to sit tight, pray & watch for the sell signal. If you have confidence in your strategy you will buy when your strategy gives a signal, sell when your strategy gives an exit signal, without hesitation never questioning why.

Skate
 
What stock do we choose ?
Human fragility such as greed and fear is what fuels the markets, not common sense, so choose stock you believe will increase in price that someone at a later stage will purchase from you.

Have you any idea how to do that ?

Skate.
 
Within the market how do we choose which Index to trade?
Finding a market with the right risk/reward combination is a bit of a roller coaster & it’s trial & error to find the one that suits. Some indexes with a market are luck lusting & boring whereas others have nail biting volatility where you’ll require nerves of steel.

Skate.
 
Filters are fine tuners
Filters are best used in a mechanical trading system, taking away the pressure of us making a judgement call, because most know, when we are under pressure we don’t perform at our best.

Pressure controls performance
Just ask a goal kicker (Johnathan Thurston NRL 2015 Grand Final ) a kick he makes without any effort in training is much harder to kick when he is kicking to win the match. Players, traders, people in general have a habit of making poor decisions under pressure and that’s another advantage of having a mechanical trading strategy over a discretionary trading system as mechanical trading systems removes the decision making process from us.

Skat.
 
We need them (Filters)
It’s a known fact, most traders don’t make good decisions under pressure and this is where filters come into their own, filters are the fine tuning mechanisms of any strategy, removing all human involvement when certain conditions arises.

Filters
Having a variety of filters add confidence to your trading knowing that your strategy is a well tuned firing machine.

Skate.
 
It’s funny how human nature often gets it wrong
We act so impatiently with the stocks that are moving in the right direction by selling them straight away, yet we reward the falling stocks with endless patience. It’s human nature to sell profitable stocks too early so we can feel good about our decisions.

A serious design flaw (faulty thinking)
When processing information that supports our beliefs even after the evidence has been totally refuted, people fail to make appropriate revisions & will double down on a falling stock.

I guess
“It feels good to ‘stick to our guns even if we are wrong,” maybe it's disbelief the position could keep falling & at some point it they believe it will go back up. (sometimes it doesn't)

Skate.
 
Just a bit longer & it will be all better
We tend to give losing positions more time to recover as no one like to lose money and let’s face it we started the journey of trading to make money and not the reverse. Holding onto losing positions for a little longer can be a very costly mistake.

Here is a secret
Cutting losing bets early is the secret of being a profitable trader, licking your wounds and taking a small loss is better than waiting for the share price to recover. Remember you don’t make money by taking larger losses.

Skate.
 
So what criteria do we use to know when to cut our losses ?
The decision to exit a trade has to be made before you decide to buy the stock and never after you make the purchase, you have to decide what you are willing to risk in dollar terms or percentage terms. You have to have a plan for this & include it in your trading plan.

Good plan
Knowing how much you are prepared to lose beforehand is a good plan.

Skate.
 
Best way to invest
The mistake that the vast majority of individual traders make is that they believe that the best way to trade is the exact same way as the big boys do it.

Its not a level playing field
What do you think the chances are that an individual, sitting at home with limited information, can find better investments than a fund that spends millions of dollars on research, has easy access to company management, and employs teams of people to dig into every aspect of a business ? (NONE)

Guaranteed
Unless you are extremely lucky, trying to compete against a mutual fund by mirroring its techniques is not a strategy that will produce superior results.

Skate.
 
The Sumo Wrestler
Trying to match the way the big boys do it is like challenging a sumo wrestler to a wrestling match. There is no chance of beating him at the thing he does best. However, if you challenged him to a foot race, a game of basketball, or something where his size is a disadvantage, your chance of success would be very high.

Don't even consider it
Don’t try to play the trading game the way the giants do it's futile and unproductive. You should approach the market in a way that allows you to capitalize on your speed, cunning, and flexibility.

Lets talk about us
We are speedy, cunning, and flexibility, yep that's us in a nutshell.

Skate.
 
Being active
Investing is about taking control of your investments. It is about being active and not passive. You minimize risk by learning to sell quickly and decisively, which is the investment equivalent of hitting it and quitting it.

It's underrated
Selling is one of the most underrated and unappreciated tactical tool any trader has. Traders like us can use our small size, quickness, and aggressiveness to outmaneuver and outrun the giants of the market controlling our own destiny by being quick to act when the time is right, and quick to retreat and sell at the first sign of trouble.

Skate.
 
Trading is having the right attitude and mindset.
It is recognizing and understanding that as an individual investor you need to look at the market differently to gain an advantage. You must embrace the fact that there is no way you can consistently beat the big boys at the trading game by acting like one.

Run for the hills
Once you recognize that fact and start focusing on the advantages you have as a small individual trader, you will be on the road to success. However, the small trader must also be able to change their minds quickly and run for safety if it looks like their initial decision was a bad one or if trading conditions have change.

Skate.
 
Typical trader
Much of what the typical trader knows and believes about trading in the stock market to me is just plain wrong. I'm amazed how little most know about the constructs of the market. I'm in the same boat because there are some trading systems I can't get my head around.

We think we know
One of the most dangerous and ironic trading myths is the well known phrase “Buy low, sell high” & “Buy stocks that are fundamentally cheap” are logically indisputable & on the surface that doesn’t sound like such a bad idea but most traders really have no idea how to apply such principles in a manner that will make them money.

Skate.
 
Shouldn’t we seek out “bargains” when we buy a stock ?
Unfortunately, whether or not a stock actually is a bargain has little to do with how the current price relates to past prices. In fact, the best bargain may actually be a stock that is trading at its highest price, and the worst bargain may be the one trading at its lowest price.

Skate.
 
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