Wednesday, May 31, 2006

Notes to self ...

Doing more reading while I wait for my account to be funded. These are just some notes for myself, so they may not make much sense.

1) I do not have to trade.
This is not my job. I do NOT have any real need to trade. I will only enter a trade because I have determined it to be a 'good' trade. My broker doesn't care if I win or lose on a trade as long as entered the trade.

2) Stop-loss orders are my only friend.
Just like poker every dollar I lose is someone elses gain, every dollar I gain is someone elses loss. Nobody is looking out for me but me. Many people have volunteered their experiences in the stock market when they find I'm doing this. Without fail their stories fall into 2 categories. Winning stories; where they tell me about some stock they bought at the "ground floor" to see it rise (most of these people are the 'buy and hold' types, and the increase took place over many years). Losing stories; where they tell me about all the times they lost money, from not being able to "watch" the market or from hoping it would turn around. Nobody who shares a story with me ever mentions where their stop-loss points or take-profit points were, they had no plan if the market turned against them, not the winners or the losers.

3) My goal is to find good trades, not massive profits.
Similar to #1. In poker my winnings took place over thousands of hands. On average I only bothered playing with 30% of those hands. By only entering with good hands I could average 3-5 big bets in profit every 100 hands (including rake). There my be thousands of trade opportunities every year, I will only enter the good ones.

4) Volume, Volume, Volume!
Price is a "meeting of the minds" between buyers and sellers at a specific point in time. Price may fluctuate wildly as different people with different goals and different mindsets come together at certain points. Volume gives indication that the particular "meeting of the minds" is backed by the 'crowd' of the market. A price move has different meanings depending on the relative move in volume.

5) Herd mentality
Trends gain strength because of the herd mentality of crowds. If everyone and their mother is in on a trend, it's probably about to end.

6) Amatuers open, pros close
The opening price of a given day (and more so on the first day of the week or month), is influenced by 'amateurs' placing orders after market hours and those orders being filled at the market opening. When placing a stop order to enter a position, delay the order for an hour or two to avoid the rush and correction.


Current Trades

What is it? BlahBlah

Ticker: XXXX

Cost: $X.XX

Value: $X.XX

Exit Point: $X.XX



Trading Account Summary

Current Balance: $X.XX

Current Value: $X.XX

Highest Value: $X.XX

Lowest Value: $X.XX

Highest Drawdown: XX%

0 Comments:

Post a Comment

<< Home