One of the biggest pitfalls in trading is to rely too heavily on the guidance of other people. It is important that you formulate your own personal view of the world and make investment decisions in tune with this view.
2)Be clear about your competitive edge
Everyone has a personal competitive edge. The competitive edge might be as little as being more removed from the market than other players and thus not having to contend with the distractions of short term price movements. Some of the most successful investors have taken a very broad brush view of the world and have generated huge returns by making some long-term bets.
3)Use quantitative tools
Market prices are determined by the interaction of groups of investors trading on very different time scales. The actual impact of fundamental factors depends on the market dynamics. Typically, market observers take a far too simplistic view of the interaction between market dynamics and fundamental events. Only sophisticated quantitative models, that are similar to weather forecasting models, can systematically analyse market conditions and generate forecasts of consistent quality.
4)Trade in liquid markets
Markets are not continuous and it is dangerous to assume that positions can be liquidated at any time. For this reason, investors should stay away from illiquid markets, except if their investment horizons are very long term.
5)Follow top down approach In establishing an investment strategy, it is important to take a top down approach starting with defining the investment philosophy, formulating the decision process and allocating the assets to the markets and underlying instruments.
6)Build up positions over time
A major pitfall to any investment strategy is the discrete start of the investment program. If all funds are committed at the start of the program, the overall performance of the investment program will depend significantly on the specific entry point. If the investor is lucky, his performance will have a positive bias, otherwise, he will be negatively impacted by the start of the program.
7)Stick to your time scale of trading
Another major pitfall is that investors change their trading horizons depending on the profits and losses of their positions. If an investor accumulates losses, he tends to extend his trading horizon in the hope of recouping his losses. He should not do so. He should stick to his initial strategy and close out his position. There are many other investment opportunities waiting for him provided he has not lost his money.
8)Watch out for transaction costs
Transaction costs are far more important in the overall performance of an investment strategy than typically understood. The reason is simple: Transaction costs are 'certain' costs, whereas trading returns are uncertain. It is easy to control transaction costs, whereas it is difficult to enhance the success of your trading decisions.
9)Tactical tricks, such as limit orders, stop losses
Performance of any investment strategy is increased by setting limit orders in opening positions and maintaining a strict stop loss regime. In this way, the investor can turn to his advantage the short-term overshooting of markets. Quantitative forecasts are an ideal tool to set limit orders and position stop losses. """"
And what is the nature of this market that trading tips of any kind are applied to ? In part...... One of
""""Market Heterogeneity
Market participants fall into broad groups defined by their trading objectives, their appetite for risk and their trading time frames. Foreign exchange dealers and market makers, for example, trade for profit at relatively high risk and at a high frequency, possibly several times a day. At the other extreme, central banks trade infrequently, usually for political or national economic reasons rather than for profit. Companies and pension fund investors may also trade infrequently and at low risk. Because a range of groups respond to events from a diversity of viewpoints and trading frequencies, patterns emerge.
This market heterogeneity means that the impact of a news event is not immediately absorbed throughout the market, but rather is slowly dissipated over time. The initial market reaction to an event is followed by a series of secondary reactions in which participants react to each other's reactions. This process unfolds over the time frames of the various participants, slowly becoming weaker. "These after-effects are like the ripples on a lake after a stone has been thrown into the water," comments CEO Richard Olsen. "It is impossible to predict news events-the stone hitting the water-but by modeling the structure of the markets it is possible to predict how the ripples will pass through the lake and cause secondary reactions."
These findings add further weight to the company's "heterogeneous market hypothesis," demonstrating again that recognizing the diversity of market participants can open the door to new perspectives on market mechanisms. """"
Hence Number One question for motorway,,,,, IS WHAT IS THE TECHNICAL POSITION...(who is holding ! )
