Warr87, I think easiest place to start is money management, my interpretation of Fixed fractional
20 positions, 5% in each eg $20000 capital = $1000 worth of stock in each open trade.
So at this stage if any one stock becomes delisted you lose 5% of your capital, true but rare as a system usually gets you out before that happens.
Risk - usual risk suggested is max 2% of any open trade. If you place your isl (initial stop loss) say 50% below your purchase price then you are risking 2.5% on that trade. (just an example)
you will find your own way of placing your ISL just make sure less or same as the 2% rule.
Money management great place to start and once followed consistently increase the time which you need to find the way for you to become a consistently profitable trader.
Some nice ideas in your initial trading plans but it's much too vague. You're not sure about your setups, entries and exits. A long way to go yet and there's much to learn.
IMHO you don't have enough capital to start trading. You need to save and add a lot more, imo you need $30K.
I'd suggest you learn more about AB, test heaps more, especially the weekly systems that @Skate has outlined. While you're learning, save like crazy. There's no need to rush to get into the market especially when you're under-capitalised.
Sometime in the next few years while you're learning and saving, the markets will dip. There may even be a recession, who knows, but a market dip will be a great time to think about getting into the market if you're prepared.
Thanks peter2. I actually read a lot of your stuff, as I find myself being drawn to your style. Between your trading, Skate'sm and willoneau I am finding a lot of good stuff. And while I have defined a system for this account, I have a number of other ideas I would like to try later if I manage to survive. I also agree that you need to know a little bit of other approaches too. I've taken more to technical analysis than I have fundamental. I do believe there is something to be gained from having fundamental analysis skills. If I had 100 stocks to chose from for my next trade, and all are essentially identical, obviously something like fundamental analysis would help. And I am trying to be patient. At the moment since I have find a system that I really like I obviously have the urge to just jump in now. But I will wait and paper trade live while I can. I have already come up with problems in how I should best apply my TS.
Yes, the plan is to scan for recent crossovers. I have a price filter that has helped. I also tried a volume filter but that didn't yield me any better in my testing. But I have used volume much in my coding before so I'm not even sure if I used it properly. While looking at the charts I have also added a 52 EMA for a longer term comparison. While it isn't part of my scan, it will help me filter out some. I also look for the pull backs and consilidation to see if the momentum is likely to at least continue up (or rather, is there still a leg of this for me to follow). The fast EMA allows me to catch on quick and close out quick as well. While I am likely going to get out a little early at times, back testing has shown my avg losses are low and when I do catch onto a trend it is significant! The biggest losses are when the 30% trailing stop is used just after an entry is made.
As for risk. I will use 10 max positions, $20k starting, and with the 30% TS leaves me at 1.5% risk. The max DD was only 10% during back testing (and when walked forward), and also tried on various universes too. I realises in real world trading the DD is likely to be higher, and annual return to be lower than back testing.
10 positions with 30% risk is 3%
Hi @Warr87, I've been reading your posts with interest & there has been some good advice given to you already.
Enthusiasm
Being eager to start trading before all the legwork has been done is a major treat to the money you have set aside for trading. @peter2 has given you excellent advice that is worthy of a second read, lets not be in a rush to lose your money.
Repeatable patterns
Testing each & every idea is important ensuring you can find repeatable patterns that will give you a mathematical edge to you trading. On my 'Dump it here' I've given you a few ideas to test, I've even paper traded 3 of them for 6 months & posted weekly updates so others could follow their progress.
I explain the strategies in detail
Read from here, it may give you an idea to test: https://www.aussiestockforums.com/posts/1025758/
Find an idea that works before trading
We all have opinions of what works & what doesn't & without statistical proof you will find it difficult to have the confidence putting your money on the line trading that idea. My MAP strategy is a simple strategy & on paper it has the ability to make it.
The 'MAP Strategy' trading Plan
To keep this strategy as simple as possible:
(a) Buy whenever the Closing price is higher than a selected Moving Average conditional on the ROC filter being above 0% - OR - buy when the Closing price is at least 10% higher than the previous week close with Volume higher than the Moving Average period.
(b) Sell when the momentum stalls or when a trailing stop is hit.
In Plan in English
Buy when the price is moving up with momentum & Sell when the momentum stalls or the trailing stop is breached. Read my 'Dump it here' thread before you risk one dollar.
Lets be a winner at this game
I want you to make it when you start trading, so lets start out on the right foot instead of trading too early by giving your hunch ago. $20K is an awful large sum so give it the respect it deserves & do your homework before risking it. Don't forget I'm on your side.
Skate.
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