Short term - knowledge library 2.0 (This thread is READ ONLY.... No unauthorised Posts), page-56

Why is it important to experience a "Major Correction" before you can consider yourself a successful trader? When is the right time to take losses?

29^th – 31^st January 2016

https://hotcopper.com.au/threads/short-term-trading-weekend-lounge-29-31st-jan.2689649/#.WLUu239p8ug

Collated by Gamefisherman



Freehold
18,849 posts.
Date:29/01/16
Time:17:18:17
Post #:16898600

I think the Right Time to take losses is ...

1. Price drops to your predetermined exit point. You should have decided a point at which you would exit BEFORE you enter the trade
2. If the fundamental reason for your entry ...no longer exists or materially changes.
3. The $ loss exceeds that which you have specified in "your rules"... IE I will not take a loss Greater that x % of my total capital ie $2000 ...Defo not more that $2500.
4. Market experiences or sector experiences a major down swing
gamefisherman
2,521 posts.
Date:29/01/16
Time:17:39:13
Post #:16898828

Thats a great question and will be interesting to see how others respond.

I look at the whole concept in a slightly different way, but thats just me. Protecting capital is essential if you want have longevity
trading the markets. If you have one bad trade it can effect your own trading psychology (and you might not even notice that change) and it will substantially damage your trading capital.

For me, 90% of the time I will have some type of stop loss in my trading plan for each stock, and that stop will be entered when I buy into a stock. So in essence, the way I look at an 'unprofitable trade' is that is it purely a cost of doing business. I leave no real margin for error. It is just a mechanical part of the way that I trade. For example, my stop loss will either be a certain % of the price that I am buying at, or set around a recent high or low of the last couple of trading bars.

Freehold
18,849 posts.
Date:29/01/16
Time:17:52:09
Post #:16898966

Experiencing a MAjor Down Swing ...


A true Story....

I had a friend who lived in Singapore who was a trader primarily (Ex accountant) in the hot sector of Tech around the year 1997-2000... He started small with 20-30k and was enamoured with Tech stocks...anything Tech. He traded extremely successfully... and was full of Bravado ...the phrase Bullet Proof comes to mind. He made money on good tech decision he made money and on bad decisions ... 30k turned into $3.8 million. He drove a fancy car lived in a fancy apartment had a high maintenance /cost Lifestyle and girlfriend... He went over and above and started leverage but only small to med amounts given the portfolio size. ... He bragged about how great a trader he was and how he had given up full time work forever... I was jealous ... seeking tips /advice... which he gave freely and enthusiastically.

Problem was he (and the rest of the world) was riding the crest of a giant wave but did not realise at the time. That Tsunami was the wordwide Tech boom ...The wave hit land and crashed in a matter of days / weeks...

End result was all tech stock he owned collapsed and in 3 months he was left with nothing but debt and had to sell all his assets to pay for it... could not even afford to pay rent at one point and had to return to Aust. given he had left his job for more than 18mth had difficulty finding a job, had to borrow more money from relatives to survive ...his health suffered, hit rock bottom ... slowly he clawed his was back to have a half decent job after a few years and cleared his debts.

The moral of the story ... Don't think about giving away your day job until you have survived and traded through at least one giant correction. I survived the Asian Crisis, the Tech Wreck ... but still got "pantsed" by the GFC as it was a different kind of crash... a growing Snowball of destruction as opposed to sudden Tsunami.

So a bit of objective self analysis is in order... is your Ego getting out of hand... if so then your showing the 1st danger signs ... you would do well to keep this behaviour in check because the next Tsunami will come as sure as sun will rise tomorrow... It might be early in 2016 or 2017 or 2020 who knows but it is coming ... We may be high on a crest right now or not who knows but not many will see it coming they never do??? But key is never over extend yourself and be ready to go to cash at a moments notice... If you are a hoarder of failed Short term trades and your bottom draw is filled Stocks deep in the red then you are future cannon fodder. If you have trouble cutting your losses early you are future canon fodder... I only store "Green" coloured stocks in my sock draw not red ones. And those stocks need to be growing "bright green"

forrestfield
11,903 posts.
Date:29/01/16
Time:21:21:09
Post #:16900660

A great story Free, thanks for sharing...

I guess if you don't want to work full time and you are not sure about the future perhaps you can keep building your skills so just in case if you need a job again you are well qualified...

Like my brother he does shares for almost 2 years now... however, he has done a corporate degree during this time and is now working towards Ph.D... so if everything crashed down, he will have skills to find a half decent job to survive and then can progress quickly due to his skills...

Also keeping your debt levels low would be a very wise thing... so just in case if you are unable to survive you can still work things out without much pressure...
TraderGT
7,200 posts.
Date:29/01/16
Time:21:57:25
Post #:16900875

I think many forget and don't understand a bear market isn't just straight down as a bull market isn't just straight up.

As you can see there was a period for 10 weeks in Mar-May 2008 were the market rose......this moments can make you think the nightmare is over but it made only be beginning!


I got done over in 2000 as I was only 19 years old and had no idea how low the market could go!

Key points

1. - DONT double down you could lose the lot
2. - Flight to safety - Most blue chips will lose 50% in a crash but make new highs within a few years, specs may lose 50% then 75% then disappear

Cycle of the markets

Lets start post a crash

1. - Recovery - Blue chips recover first and lead the market
2. - Sectors in the med caps will then lead growth, generally something different from the previous bull market
3. - Specs start running and particular sectors get very hot for 18-24 months
4. - Market peaks - you don't know at this point its happened!
5. - Unanswered questions bubble up
6. - Sentiment turns dovish
7. - Blue chips often commence the downward spiral then once sustained for a few months then liquidity in specs dry up.
8. - Market falls over 20% and a bear market commences, it will have moments when you think its turning, DONT be fooled and don't attempt to catch the falling knife.
9. - Volatility peaks and any good company announcement is sold into and all liquidity drys up, day trading is almost impossible at this point.
10. - Market finally bases (again you don't know at the time) and you roll back to point 1!

Just a simple Point process but that's what I have seen in 2000 and 2008.


The hardest part of a bear market.....

1. - You hooked on the market? Sometimes you need to walk away for Months or even year/s - However there is always something rising in a bear market - maybe gold......
2. - If you still keep your pants and some cash, the recovery can be very very profitable for you.....


To be a successful full time trader

You need to make more then enough in the good times/bull market to have plenty in reserve for harder times. Hence creating a nest egg for bear markets is important IMO.

So if someone can trade for a period of over 20 years and consistently make a living then they are a "gun" trader by definition. Not someone that can find a few winners in a hot market!


Final Point - Until you have been invested/ involved in a bear market you have no idea what your in for!

valen1828
9,874 posts.
Date:29/01/16
Time:22:40:52
Post #:16901102

Well now im a bit lickered up . There is something Frees not telling you and thats have some cash reserve or put some away for the event that no one knows about that hits the market . Even like ten percent cash in your under draw . That could be the one the that makes you through it .

Either that or you save money till the event and dont trade have like Forrest says reduced debt and wait for the crash and be comfortable you are not going enter unless your willing to hold .

My biggest mistake not holding after getting good entries thinking i can buy back in .No Knowledge of charting though ..Phcyological barriers also come into play big time when the fight starts to hold onto your shares .

I had about million and half Centro retail shares at one stage for less than twelve grand last buy was the day before it had a capitulation sell from about 2.6 cents down to 1.5 or something took the whole lot out in one sell from memoroy at open .

I was averaging down on fundmentals in riets trusts . 3500 was in certain ones same with bigshareshead . I was lucky but lost so much not holding was crazy but was working on what i had been told by a not big investor who does just that . Saves and slams it when it crashes . Long time between drinks but as he used to say working away at the day job it pays for everything with very little .

Anyway dont look back now much with it just get better at being round for the event and getting through it . Wars happen they were good events dont know why they are not now? Gulf war scares no one knows whats going happen now they just seem like second nature and the market does not care .

Does short selling and cfds etc etc protect the market now????? Kind of introduced to do so . I sway to thinking they do . The market is so leveraged through derivatives they make up something has to have value somewhere to leverage off for derivatives the bankers make up .

Remember free eftpos . Now if not careful its like $2 or something . Thats ticket taping transactions down to where they have tuned it into parcel pips like forex with bots hammering you .

Cashless society i can bet it will start free transactions then suddenly its a huge cost to the bank and you get those tiny little charges hitting you . Transaction tax just pip at a time

I dont mind banks but it would not surprise me the big wigs of them sit down each day with a couple of coins we dont use anymore to balance the books each day by one cent maybe a two cent but they wont be putting a rounded up five cent piece in thats currency on the loss side .Are computers smart? I think when it comes to counting very smart .

Anyway why not have two stop signals for your stop loss ? Ie for end of day work swinging around in pennies if you follow price action first . Does not always work but similar to pilot in you can pilot out? Thats what free carried is about i guess ?

fumoy
1,451 posts.
Date:30/01/16
Time:10:21:07
Post #:16902461

"Momentum investing, or buying stocks with the largest six-month and one-year price gains, works well when volatility is low, with the VIX below 25" http://www.billionairesportfolio.com/vix-the-rule-of-25-and-leadership-change/2698

US and AUS weekly VIX chart looks bullish- now below 25 and candles show heading below 20.
Especially the US VIX has long upper tails on the red candles -says market will uptrend

DJI seems like a bottom reversal of a 4 year trend MA which has historically shown to have many reversal points. Maybe no bear market - just a 4 Yr reversal pattern is the situation at present....according to fumoy...

So is a good guide from hindsight to foresight...Just gave away another trade secret that has cost me millions of $ and decades to experience.....but my life philosophy is to bring the esoteric to the exoteric, the inner to the outer, the darkness to the light, the dead to life, and grow money from accumulation of my own cash. To maximise the minimum resource, to realise the paradox of a partnership of freedom. To create and realise something from nothing and nothing from something, for being without bias to realise reality.

To own my trades 100%, which means never borrowing or leveraging.

The mental/self aspect has to be is >50% of strategy- because without this control, consistent positive results could not be achieved.

Zand34
2,328 posts.
Date:30/01/16
Time:11:33:24
Post #:16902806

" When is the right time to take losses"
For what its worth here are my thoughts on the subject-
Emotional attachment to a stock!, never get emotionally attached to a stock and keep holding on because you believe in the story and think its just a matter of time until others wake up and get on board, meanwhile it keeps making a steady descend downwards but because you're so emotionally attached you keep telling yourself it will bounce back from here it must the story is too good for it not too! if others are not buying the story then there is a problem, I for one have been caught up and emotionally attached to a particular stock only to see it retrace to over 50% ! so learning from my mistakes now if there is no stop loss in place and the TA is looking bad and she's going down fast, I don't turn a blind eye anymore I get out and move on to the next one.
Averaging Down- I know some are all for it, I'm way against it! you'll come across many posts on many threads stating time to top up, time to average down, these prices are at bargain levels just be very careful because you may start to feel better when your average buy in price starts to come down but within a few days price may have continued to tumble so where you may have been 20% down you now are staring at a 50% + loss.
Better Opportunities- sometimes you may be sitting on a stock and its not going any where or you may be sitting on a small loss you may see a better opportunity to jump on, Ive done it a few times where my money has been tied up in a particular stock and sitting on a small loss, Ive sold and bought a new stock because of TA or something about the company has caught my eye, so whatever loss has been recouped with the new holding. Just remember that losses can be recouped sometimes pretty quickly but the emotional & financial damage holding onto a Dud takes a lot longer to repair!
One last thing once you see certain stocks get pumped multiple times a day usually by the same people on some of the HC threads and you're on one of those stocks! this is your number 1 T/A signal to get out while you can even if you're sitting on a loss,
Cheers,
Z.

Anton Chigurh
11,245 posts.
Date30/01/16
Time:2:45:19
Post #:16903171

Some trading words to live by in that post, Freehold!

It's so easy to get that invincible feeling as an investor when everything is going great guns and dog specs with no reevenue are making you bags, but unless you have the rare ability to get uber wealthy from a single Bull market cycle, then my measure of someone's investing ability is how many Bears they've been through and remained solvent to tell the story. I'm always much more interested in finding out what stocks successful investors were buying when there was blood on the street than now.

Good post from GT too. When you've spent some time in the market you think you might see these things coming or have a much better chance. Truth is, it's exceptionally difficult to spot a Bear until a degree of damage has already been done. The best outcome imo is exiting as much high beta stuff before the rot sets in and holding firm on the quality companies that will keep paying you, even while markets are tumbling.

RAllen50
597 posts.
Date:30/01/16
Time:13:08:08
Post #:16903251

Great story. My personal experience was similar.

Worked for Goldman Sachs out of university (during tech boom 1.0). Made 1.2mil (UK) in bonuses plus another 1.5mil in equity from the GS IPO. Felt totally bullet-proof. Had large drug, drink and dance habit as you would at 21-24.

Started putting this money to work in tech plays and IPOs which carried on going up and up. Egg (the first internet bank floated), LastMinute.com was a gazillion times oversubscribed, even AOL-TimeWarner merger seemed like a good idea. We thought that tech was here to stay and the new normal. Within a year about GBP7mil went down to about GBP1M. Still good coin but my balls shrivelled and didn't fancy the market again until about the GFC when there were value opportunities again everywhere.

I am still super cautious but am always looking at macro as the canary down the mine.

Pisces
14,674 posts.
Date:30/01/16
Time:13:33:04
Post #:16903361

It's probably not what people want to hear on a trading forum but you make all your money in bear markets not bulls ,and that's been the case for nearly everyone who has had long term success in the markets . Bear markets and bear phases are when the most compelling opportunities arise . Bull periods are where you capitalise on your good work during the bear period and because you've usually got significant gains under the belt when the bull is in full swing can take shorter term opportunities that a bull offers without having to rely on that and get wound up in lots of trades.

Because we've had mainly bull markets for this current lot of investors /traders many think that's the way markets will always work . Having said that the crashes have been doozies which wiped many people out ,the subsequent recoveries have been shorter term in duration than historically so ,so people need to provision for the fact that an extended bear market may come back at some point if Governments run out of ammunition or inclination


gamefisherman
2,521 posts.
Date:30/01/16
Time:14:13:11
Post #:16903512

The pic below shows the % loss taken and shows the % needed to recoup from a unprofitable trade. I have seen this pic a few times over time posted in the HC threads, so not sure whom first posted it, but it is rather telling. That pic is the exact reason why I work with High Value Actions. In other words, everything I do is pre-determined as much as it can be.

1. I look for a trade and when I find a potential candidate, I will add it to a Word doc as a chart (at time of getting ready to act). All DD has been done by this time and that has also been added to the Word Doc
2. I will work out the risk reward, and write down my entry price zone and intial price target zone in the Word Doc.
3. Depending upon the liquidity of the stock, I will either average in to get a feel for how it is being traded, or will load up with my full quota.
4. Risk reward is worked out and added to the Word Doc, that includes the price zone that I will only buy at, and my initial price target zone.
5. As soon as all the conditions of my TA are met, the trigger is pulled and my stop loss that was already worked out and noted in my Word Doc is locked in so there is little chance of losing major capital. On a handful of occassions each year I will be gapped down through my trade, mostly at open on either the day after entering, or within the next few days of entry. As trading is my living, my eyes are all over my screens and my hand ready to pounce when certain results occur, that is one of them. When my losing trade is stopped, I then add the chart at that time to the Word Doc. I will either re-enter a trade up to 3 times, and if it doesnt workout, I will move on.
6. As I have faith in my trading plan, my losses are viewed as mentioned as just a cost of doing business. Sometimes I will have a losing run, so to speak. When this happens, to keep my mind focussed, I will go back through my trading plan and see how it worked on previous trades and look at them in a Word Doc. Of course I find it frustrating, who wouldnt, but being able to keep emotions in check is pivotal.

I am a big believer in we tend to learn from what we see. I know that my trading plan works, so I know that as long as I stick to it, winning trades will return.

Trade mindfully ie be aware of your own self talk when taking a loss as this can also have a pretty big impact psychologically, without you even knowing it often. It took me years and years to become able to trade mindfully and is something that I know that I have to check in with myself quite often and will have to do so in the future.

Freehold
18,849 posts.
Date:30/01/16
Time:16:28:43
Post #:16904082
On tax...

I used to pay a lot of attention to tax implication of individual trades ...even holding some short term trade 12 months for the discount... Only to find that some/many folks were doing the same thing and the price would crash before my 12 months were up ... Ultimately I found that I made vastly more money (after tax) when I just sidelined tax implications and just traded the trade for the biggest profit possible... alternatively you may care to funnel profits into a family trust and/or a purpose setup investment company to manage it more effectively. Big topic and not going into it here and now perhaps for another weekend...

Orwell
1,408 posts.
Date:30/01/16
Time:16:58:13
Post #:16904218

Quite an interesting thread discussion here on trading and a few thought provoking comments.

One thought is how distorted our economy and business became pre-2007 and probably still is. RAllen making millions in bonuses as a 21-24 year old to TraderGT’s friends suicide for falling back into a normal life. Few people are genuinely brilliant, original or intellectually creative enough to break the norm in mature economies, but some will collect millions (or lose it) through luck or being in the right place and time or being on the right train. I’ve spent 25 years plus in the market, much of that was through cycles of ultimately losses, reinventing my approach and rebuilding, but I know how hard it is to make money in all types of markets between bull and bear.

When I hear stories of plenty of people making millions from their own trading (not working for a bank or something), turning $10k into $5m I get very sceptical. It makes me wonder if I went through their trades whether I’d really be impressed with their skills as a trader or whether I’d conclude it was massive punts on spec stocks in a late bull market and got lucky, or even true at all.

Moesoeloe, a lot of these video’s by people who are training others makes you wonder why they are seeking training income if they are expert pulling millions from the market.

@volcanic, I don’t know anyone who has made millions from trading (not buy and hold investing). I’ve know of a few who lost those amounts in the GFC. I’m interested more academically in the approach of those claiming to have made millions, as a long term student of markets. Care to elaborate on any approaches of those you know?

Re the themes:

When is the right time to take losses? I enter a stock with a technical thesis. I’ll exit if a stock is not behaving right against that thesis or on the assumptions I used going in. Alternatively if a change in trend occurs. I don’t use stops as a rule.

Why is it important to experience a "Major Correction" before you can consider yourself a successful trader? Because it’s the only way to prove your performance is not luck or your skill narrowly based and that you can make a long-term profession of it. To make money in all market conditions takes expertise. If you can thrive in a full cycle up and down you’ve got a chance of hanging onto your gains over decades in the market


fumoy
1,451 posts.
Date:30/01/16
Time:18:31:20
Post #:16904592

Its too much for me to understand - just my simple system uses MAs 1 2 4 year ma's and 4 yr MA has been bounced off in the DJI like 1987 and has shown itself to be a very strong indicator- based on my continually reviewing charts - is the best I can come up with- so dont know much about economic theory and am too mentally dyslexic to maintain the same view every day/week-the need to be flexible is mental- so as the last level of support-I'll just stick to whats above the 4yr ma and call it uptrend and whats below and call it downtrend.

I see bounce off the 4yr MA as a major signal and was waiting for it and it happened with the candle this week.

Also other points u raised - my success is from the small teck specs boom and the number of bad trades I make is ten times more than than the winners- so money management of reweighting into what is most probable to get a herd following based on factual FA to make an uptrend is more the art.

I lost the first big money $140k over a few years-I borrowed against my house and some super money and went traded options ETO's. Had a portable vodafone reciever that got all the prices for stocks and options - had no charting experience then- was a disaster waiting to happen with my alcoholic addicition. I used to say to myself -it was a step up from horse racing as the options ran for a few months


or me it wasnt the bear markets - I never made money on any trade- stock or options for decades-just kept at it slowly learning at my own pace and keeping my blinkers on so as not be influenced by others.

Then I realised I had exhausted my own findings for my strategy and was getting nowhere- so had to incorporate others findings for better results.- like the business principles.
When I joined Hot Copper, it coincided with the market upturn and my fortunes expanded by 25 times in 30 months. Most gains were from the desire to find out why the stocks the previous bull run went up vertically.

So this time I was consciously/unconsciously focused on getting on these and that is what my strategy has been for success -so far. Dont know how long it will last, but stock selection is getting better with the help of other peoples research and knowledge from HC.

kmac
1,528 posts.
Date:30/01/16
Time:18:48:21
Post #:16904647

Hi shortermers, like that down to earth approach Orwell. Over the years have also experienced the ups and downs of the mkt. To be honest, could have done without that tech wreck, GFC etc, but I spose the old saying "what doesn't kill you makes you stronger" is the logic behind the idea of needing to experience these downturns.

When forced to face the harsh reality of going bellyup, it becomes crystal that;
-you never really know what's ahead and what's going to happen
-should always be prepared for the worst (one of the gurus used to have a sign above his trading desk with words to the effect of "this market has the ability to ruin me today", maybe Livermore
-develop a contingency plan
-reinforces the Phantom of the Pits notion that trading is a losing game
and that losses are an undeniable part of the trading game.

What I do like about corrections and bearishness is that lots of the BS stocks get punished. Provides, then, an opportunity to better ID those nifty, agile stocks whose mgt can tighten belts, adjust strategies, weather the storm and survive. Just like we all have to do.

mouse
6,329 posts.
Date:30/01/16
Time:20:26:28
Post #:16905029

Not sure if this will help and how long you have been trading for but if you look a few post's up you will see my first ever 3 trades.
Basically i had about 60k at the time in my offset account for my mortgage. I wanted to pay off the bank and free my self but just could not find a legit way to do it quickly, being entrepreneur minded and the hustler from northern burbs i am, i thought i could take the stock market after reading about a penny stock that went up 4000% (PSY).

The above post again was first three after doing some pretty amateur reading and joining HC, FGE was Timbos call at the time on the DT thread and i liked his style so i went for it. Two months later i had almost doubled my cash and thought WOW how good am i, two months after that i was down to about 30 odd k and was losing my mind. I started posting things like the hearts conspiracy, they secretly talk to each other to pump stocks lol. I left the market for to get my head right as i felt robbed by everyone.

A good friend of mine whom is a lot older spoke with me and pull me back together. The things he got me working on was my strengths and told me i would grow from there if i wanted too. I'm not going to get into them but they are all F/A. I used them to pretend play play for a little and it seemed like it worked so i went back to real money but this time i was in no rush to get rich. I took a punt on ITT and a few others and i was back in the game.

The things i try to do every day or so is look for trends and a big hype point date. As an example i got into ESI early on as i knew it was going to have a nice ANN soon, ended up selling out for 35% profit that morning. That is why i love STT so much, you just pick a stock early on and just wait for that point. The shells and RTO's haven't done as good recently as they did last year but are still offering a nice return. All so i research stocks instead of being a sheep i was, if i don't like it i don't buy even if it goes 200% up, and remember be patient, a quick dollar mind frame is gambling. Anyway i hope that helps.

Djred
318 posts.
Date:30/01/16
Time:21:08:42
Post #:16905208

Thank you for your words it sounds rather familiar in the opening paragraph. I started last April / May with unrealistic expectations. Not bad at the start, lucky but didn't recognise it was luck, then peaks and troughs but essentially going sideways. The last couple of months have been brutal but it was only today I realised why.

My rules were in my head and my compliance questionable. Little or no patience. Cutting losses much to late letting the profitable fall rather than sell. Not having the confidence in a couple of stocks, I guess I was early but got nervous so sold out to get my money back, then the herd arrived and the price goes North. I have been researching stocks and have been reading but I have not really been learning just passing time with a resource I think. Becoming worried leads to more desperate trading in the hope of recovering losses.

I blame only myself, I don't gamble but in the last 9 months I have visited the casino each day. Posters have motives but they do not force your hand.

Today I have written my rules, I have started rereading what I have already read, this time taking notes and cross referencing to clarify. I am not going to buy more just now but will spend some time trying to figure out why a SST tip has been made and watching the progress and trading that follows.

I feel relieved to have had this moment of clarity and it was reading the posts over the last couple of days that brought it about.

Feels like the AA moment of HC posting but the STT forums are for sharing and to facilitate learning.

I feel strangely focused and motivated, thank you!

952i
1,291 posts.
Date:30/01/16
Time:23:12:28
Post #:16905696

I could also relate to @mouse response haha, except I'm hustler from the south sydney suburbs.

I also had beginners luck starting 2years ago, first buy LNG 2.27 (Doubled from there), SRX high teens (Doubled from there), felt I was invincible and also came during a bull market with biotech's booming. I didnt know what I was doing, my premise for buyings shares was:
1. Will there be demand for the product
2. Look at line graph on google has the line been pointing upwards
Then I would toss my money if the answer was yes to those two premises.

I was fortunate to actually make good profits and then had another brilliant run on Azk(Quite sure Mouse was there in the early days with me). At this point my ego got to me, thought whatever I would touch would turn to gold so I didnt put stop losses at all. Ended up selling stocks for 50% loss (I think one even ended up 60% loss) and ended back where I started.

Decided to get my stuff together, do alot of reading/learning/video tuts about the market and how it works. It began here in the STT where I asked what are good books to read, "how I made 2million on the stock market - Darvas" (thanks @Freehold) and "Technical analysis of financial markets - Murphy" were suggested to me. One book sparked interest more and more and soon enough one book lead to reading another and another.
Now recovering back my losses from my gambling period on the market tossing money on everything. Personally from my short 2year experience in the market - Greed and ego are the two biggest killers of profits. Looking back most of my losses were from Greed (have 50% profit become 10% profit cause I held to long ) and ego (no stop losses and "hoping").
Needless to say, I still have a long way to go with alot more learning. Second you think you know enough you start seeing red again.

On the theme: Watch Mark Douglas's trading psychology or read his book. Talks all about taking losses and exits will actually change the way you perceive losses.
Summary:
- Markets are often random and you must accept this, sometimes no matter how good TA/FA looks it can easily turn against you just recently I had that with RNT, spotted an ascending triangle which didnt end up breaking upwards but went down instead. Accepted it and moved on(cut my loss quick) rather than hoping for a turn.
- Study has shown if you keep tight stop losses and throw money at random stocks you have never even heard you can make still make profit.
- One of Mark Douglas's successful traders had a win rate of 3% but still made huge profits cause he quickly exited 97% of losing trades.
- If your paper trading is showing more profits than your real trading its a 100% indication your trading psychology needs to be changed.

Also a friend of mine suggested printing your rules and sticking it beside your screen each time you trade. Its worked nicely for me.
Here's a screenshot of my set see if it helps at all
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Pisces
14,674 posts.
Date:30/01/16
Time:23:40:09
Post #:16905782


I've been putting a bit of money into shells for over 30 years Sudsinvest because if you know exactly what's going on it's the easiest money you'll ever make . But not wishing to rain on anyone's parade ,this current mania with shells and the easy money that's made through anticipation ,ramping and guesswork that has generally been turning out very well in this market, is highly unusual ,certainly unprecedented in my time in the market ,and therefore doomed to failure if you get caught holding a few of them when the music stops .

In a bear market it's not so much that they need a lot of money to keep going ,it's that you can't raise a cracker for anything really speculative ,which all of these are ,let alone get shareholders to put up money when they know that the stock isn't going to run up just because there's a new business in there . The holders get bored,the directors get bored ,if nothing's running in the market would you focus on tech ,bios or materials ??? Who knows . Most of them end up worthless . The ones that survive are usually very tightly held ,top 20 holding say 60-70% , have plenty of cash or access to cash ,a patient capital structure.

Fwiiw I'm happy to put good money down that the vast majority of businesses ,if not all of them , that have gone into recent shells won't survive a serious bear market . Just my opinion

jeans_sammy
10,567 posts.
Date:30/01/16
Time:23:50:51
Post #:16905814


Wheneva; I pass by ST thread (specially the weekend one), it always surprise me about the quality & exceptional experiences that have been posted here. Great discussion guys and much appreciated to everyone for sharing such with wider community. Credit goes to our respected captain @Freehold and all contributors.

Much of the things has been discussed and so won't make you bored. However just a couple of points:

We are human and so no matter how much we try, spend and put efforts in we will never be perfect and hence accepting mistakes and TRY not to repeat again will be the best possible outcomes for an individual.

IMO - in trading/investing; it's better to lose first than winning as it will train oneself to be a better investor/trader and will teach to spend/preserve hard/easy earned money wisely .

Starting from difficult time and in past 3-4 years time; I learnt that one needs the " PATIENCE & CONFIDENCE (on research)" more than money and education. I must have clear answer to why I am buying the stock either backed by FA or TA and combination of both would be much better. Will I be averaging up or down if price fall? How much will I able to put into this? How long or upto what profit/loss will I able to hold it?

Would love to add more but believe much of the things already discussed by other experts and so Let's just get ready for great Monday .