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- 6 November 2012
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Hi All,
A while ago I started a thread saying how I was about to enter the market and basically asking what rules people use and for some general advice. I did get some advice but the overall feeling was that I needed to start educating myself... so thank you. Spring Hill expressed his worry that I would get chewed up and spat out by the market and that really got me thinking and I wasn't even close to being ready.
So I went to the library and borrowed a couple of books. 1 was Louise Bedford : Trading secrets and the other was Matthew Brooks : Stock market strategies that work in Australia. Louise's book was enlightening and I just wanted more, I felt I had taken a huge step with that book and I had/have a hunger for more information. I bought Louise Bedfords : charting secrets for more of the same thing from her. I also bought Nick Radge : Adaptive analysis for Australian stocks to get another perspective of TA and trading strategies, his points on the expectancy curve, risk management and Mind set are really starting sink in and shows If you do have a good system and you can place yourself on the profitable side of the expectancy curve then your going to make consistent good returns
I downloaded and read 'Reminiscence of a stock operator' referred by CanOZ and Louise Bedford and wow that book packs a lot of punch, I took notes and really loved the story and the psychological side of the equation that that book highlights. It really is a powerful book and I wanted more. Nick Radge recommended in his book to read Mark Douglas : Trading in the Zone, I am nearly finished that book and I am now getting to understand the psychological challenges I face in the future.
So a brief summery of what I have learned
1 Risk management - I believe I need to have a pre-defined risk on any trade with a stop planed before a trade is put on. If a trade doesn't go the way I am expecting and a stop loss is reached then close the trade every time. Psychologically this may be a hard thing to do but it is a must. Don't have a fear of picking a loosing trade as any trade can go in any direction at any time, this highlights the importance of a stop loss to limit your losses. Use a trailing stop which moves to breakeven ASAP to protect capital then move it as the price moves. Never average down as this is betting against a trend
2 Money management - Selecting position size relevant to the amount of dollars I would like to risk. using a 2% rule as risk is a good idea ( 2% rule = 2% of capital/risk = amount of shares to buy (risk = entry price - stop loss)) don't commit more than a certain amount say 25% of capital on any given trade. Look at pyramiding when the trade is going how I expected.
3 Keep records and self evaluate on each trade - I have made 2 trades and 1 closed with a loss and the other is at a loss at the moment, in my diary I have highlighted what I have done wrong and learned valuable lessons from them, these trades were put on before I probably should have but hey I'm learning.
4 psychology is very powerful in trading and I will need to learn how to manage myself and my trades, I have to accept that even though I can follow a trend I can still get it wrong. I have to accept that the market can and will do anything at anytime therefor don't fear being wrong, don't hope! just accept whatever happens and move on.
These are probably just the basics but most of what I have read all seem to be pointing to the same thing, you can use FA or TA or whatever you want to pick your stocks but the rules of trading should still be the same.
If anyone would like to recommend any more books that might help me go ahead. Or if you have any advice for me then please throw it at me. I am like a sponge at the moment so it all feels good
Thanks all
Rider
A while ago I started a thread saying how I was about to enter the market and basically asking what rules people use and for some general advice. I did get some advice but the overall feeling was that I needed to start educating myself... so thank you. Spring Hill expressed his worry that I would get chewed up and spat out by the market and that really got me thinking and I wasn't even close to being ready.
So I went to the library and borrowed a couple of books. 1 was Louise Bedford : Trading secrets and the other was Matthew Brooks : Stock market strategies that work in Australia. Louise's book was enlightening and I just wanted more, I felt I had taken a huge step with that book and I had/have a hunger for more information. I bought Louise Bedfords : charting secrets for more of the same thing from her. I also bought Nick Radge : Adaptive analysis for Australian stocks to get another perspective of TA and trading strategies, his points on the expectancy curve, risk management and Mind set are really starting sink in and shows If you do have a good system and you can place yourself on the profitable side of the expectancy curve then your going to make consistent good returns
I downloaded and read 'Reminiscence of a stock operator' referred by CanOZ and Louise Bedford and wow that book packs a lot of punch, I took notes and really loved the story and the psychological side of the equation that that book highlights. It really is a powerful book and I wanted more. Nick Radge recommended in his book to read Mark Douglas : Trading in the Zone, I am nearly finished that book and I am now getting to understand the psychological challenges I face in the future.
So a brief summery of what I have learned
1 Risk management - I believe I need to have a pre-defined risk on any trade with a stop planed before a trade is put on. If a trade doesn't go the way I am expecting and a stop loss is reached then close the trade every time. Psychologically this may be a hard thing to do but it is a must. Don't have a fear of picking a loosing trade as any trade can go in any direction at any time, this highlights the importance of a stop loss to limit your losses. Use a trailing stop which moves to breakeven ASAP to protect capital then move it as the price moves. Never average down as this is betting against a trend
2 Money management - Selecting position size relevant to the amount of dollars I would like to risk. using a 2% rule as risk is a good idea ( 2% rule = 2% of capital/risk = amount of shares to buy (risk = entry price - stop loss)) don't commit more than a certain amount say 25% of capital on any given trade. Look at pyramiding when the trade is going how I expected.
3 Keep records and self evaluate on each trade - I have made 2 trades and 1 closed with a loss and the other is at a loss at the moment, in my diary I have highlighted what I have done wrong and learned valuable lessons from them, these trades were put on before I probably should have but hey I'm learning.
4 psychology is very powerful in trading and I will need to learn how to manage myself and my trades, I have to accept that even though I can follow a trend I can still get it wrong. I have to accept that the market can and will do anything at anytime therefor don't fear being wrong, don't hope! just accept whatever happens and move on.
These are probably just the basics but most of what I have read all seem to be pointing to the same thing, you can use FA or TA or whatever you want to pick your stocks but the rules of trading should still be the same.
If anyone would like to recommend any more books that might help me go ahead. Or if you have any advice for me then please throw it at me. I am like a sponge at the moment so it all feels good
Thanks all
Rider
. When i look back on the last 7 or 8 years i think the most fun i had was learning all the new and interesting things about the huge subject that is "the markets". When i learn something new now from my screen time, it gives me a real buzz and when you start to put it to work on live trades it gives you even more of a buzz. I get a kick out of a plan coming together more than i do the ticks gained i think.
