- Well-defined objectives. Are you trying to beat a certain return hurdle, like inflation or an index? Are you trying to generate 5% or 50% returns per year? You have to understand what you are trying to do and then bend your investment process around it. The other way around isn’t possible.
- An understanding of the markets that you will be operating in. Stick to what you know. Narrow your focus so as to make the most of your efforts. You need to know everything about the markets where you’re taking positions.
- A clearly defined methodology for getting into and out of positions. This includes which indicators, news items, fundamental data points you look at and when you take action. This is your checklist—you should have it so well defined that you can be sure of the exact steps along the way. You need a game plan so that you stay consistent and disciplined and don’t get flustered under pressure. It should become automatic and engrained.
- This methodology must utilize your strengths and skills and suit your personality. A cerebral, research-driven economist should put that to work, instead of becoming a swing trader based on technical analysis. An adrenaline-fueled athlete should be an intraday trader, not be a long-term trend follower. Remember, every successful trader has a methodology of their own which plays to their strengths and their personality.
- This methodology has a positive statistical expectancy– the gains from winners more than outweigh the losses on losing trades. Use your own statistics and the Kelly Formula for a rough guide as to whether or not you have positive statistical expectancy. On average you want to expect to win on an individual trade, meaning that your expected wins outweigh your prospective losses. That doesn’t guarantee that you will actually profit on each trade, it just means that over a sufficiently large quantity of trades, you will come out ahead.
- A well-stated risk management policy for when you get out of losing positions and how you manage risk overall. Cut losers. Let winners ride. Many people have tried to overthink this rule and ended up losing as a result. Furthermore, you never want to put yourself in a position where you can blow up, so you need to be thinking how you can avoid taking excessive risk in the first place. Just remember Warren Buffett’s Two Rules:A framework for sizing positions. This is related to risk management— obviously, you don’t want to take a position that’s over a certain size, ever. But you may also want to size positions according to certain specific critieria, such as your conviction in the position or volatility in the market. Or they could all be the same size. Nonetheless, your methodology has to be able to address it and come up with a well-reasoned answer.
- Never Lose Money.
- Never Forget Rule #1.
- A framework for sizing positions. This is related to risk management— obviously, you don’t want to take a position that’s over a certain size, ever. But you may also want to size positions according to certain specific critieria, such as your conviction in the position or volatility in the market. Or they could all be the same size. Nonetheless, your methodology has to be able to address it and come up with a well-reasoned answer.
Archives of “January 2019” month
rssThought For A Day
The talking heads on TV
Trend Following Goes for the Middle Meat
Consider an illustration that can make you rich:
Trend following does not pick bottoms or tops. You always get into a trend late, and get out late. You cannot predict a trend. That chart might not seem like a great strategy at first glance, but it is the foundation of one of the most profitable insights in the history of market speculation: capture the middle meat and you can make a fortune.
How profitable trading really works
A Good Politician is quite as unthinkable as an honest burgler
Perfect 10
On 11th Sept’09 ,I had written about Base Metals ..just click here and see
On 17th Sept’09,Written not to touch GOLD and Don’t hold long in precious Metals….u don’t believe …click here
On 21st Sept ’09 ,written about Natural Gas ..Don’t miss to read …click here
On 21st Sept ’09 written about S&P 500 ,No Magic No Miracle………..yes it had crashed :Click here and see
On 21st Sept ’09,I had written about Shanghai Index and just see in last 4 sessions it had crashed again…look here to BelieveOn 22nd Sept ’09 written boldly that I expect crack in Crude oil….for these type of forecast u dont have to pay money to Jokers ,I will write free…click here
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McDonald's used WiFi signals to attract customers
Four Multi-Millionaire Traders Share Their Thoughts On Trading
“The key is consistency and discipline,” says Richard Dennis who grew $400 into $200,000,000.
“The key is consistency and discipline. I don’t think anybody winds up making money in this business because they started out lucky.”
For legendary trader Richard Dennis, the importance of being consistent isn’t just theory. In 1984, on a bet, Dennis trained 23 individuals off the street to religiously follow a set of trading rules. His point was to provide that discipline was the key to trading success. All but 3 of those beginner traders made over 100% return their very first year of trading and Dennis won his $1,000,000 bet. Consistent discipline is also what is taught in the “Futures in Motion” advisory service.
“It’s perseverance” declares Tom Baldwin who started with $25,000 and made untold millions trading upwards of $2 billion dollars a day in T-Bond futures.
“It’s perseverance. You don’t need any education at all to do it … because it is like any job. If you stand there long enough, you have to pick it up.” (more…)
What is "Weakness?"
