Archives of “exit strategy” tag

rss

10 Essential Trading Words

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

1. Simplicity – have a simple, well defined way to generate trading ideas. Have a simple approach towards the market. You can’t simply take everything into account when you try to make an educated decision. Filter the noise and focus on several key market components. For me, they are relative strength and earnings’ growth.

2. Common sense – create a trading system that is designed on the basis of proven trading anomaly. For example, trend following in different time frames.

3. Flexibility – be open to opportunities in both directions of the market. Be ready to get long and short.

4. Selectivity – chose only trades with the best risk/reward ratio; stocks with the best set ups; it doesn’t make sense to risk a dollar to make a dollar.

5. Don’t overtrade – two or three well planned trades in a week (month) might be more than enough to achieve your income goals. Patiently wait fot the right set up to form and offers good risk/reward ratio.

6. Exit strategy – Always, absolutelly always have an exit strategy before you initiate a trade. Know at which point the market is telling you that you are wrong and do not hesitate to cut your losses short immediatelly. Don’t be afraid or ashamed to take a trading loss. Everyone has them. Just make sure that you keep their size to a minimum.

7. Let’s profits run – one or two good trades might make your month. One or two good months might make your year. Letting profits run is as important as cutting losses short. Bigger winners will allow you the luxury to be right in less than half of the trades and still be profitable.

8. Consistency – Stick to your method of trading ideas’ generation.

9. Specialize – Specialize in one or two distinct setups. It could be a combination of technicals and fundamentals, certain timeframe or special event as a trading catalyst, certain sector or trading vehicle.

10. Have a plan – Which are stocks that you will be paying special attention to – this week, today. Why those stocks? In which direction you expect them to continue their move? What will give you a clue for the beginning of the move? Follow them exclusivelly and enter without a hesitation when they give you a signal. Don’t  just wake up and sit in front of your monitor without having a clue what are you going to trade today.

Top 3 Trading Strategies

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

3 Strategy1. High probability setups with short profit targets

If you are not winning more than 75% of the time you’ll never make it as a professional trader. Whilst there are other components to success, he does make a very good point. The most common trading strategy employed by successful trader is to identify a high probability set up and couple that with an aggressive profit exit strategy that captures short term gains. For example, you might have a entry criteria that easily captures 15 points on average but you set your profit target at 6 points.

2. Adding to winning positions

Many people think all trades should lead to profit but you’ll find the most successful medium term traders on win 40-55% of the time. The difference between an amateur and a professional, when trading short to medium term trading systems, is their ability to maximum their cash on a trade when it’s winning. The Turtles, under the watchful eye o f Richard Dennis and Bill Eckardt, had a way to add to their huge winners up to 4 times. Very powerful. In order to maximize this strategy you will need to identify your R multiples which will be saved for another article.

3. Mechanical trailing profit stops

Knowing when to take profits can be the most mentally draining part of any trading system. Its not unusual to start trying to let profits run that the markets starts retracing and wiping out all your open profits. The way to overcome this emotional rollercoaster is to build mechanical trailing stops that maximize your profits on winning trades whilst minimizing giving back to much in open profits. (more…)

10 Essential Trading Words

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

1. Simplicity – have a simple, well defined way to generate trading ideas. Have a simple approach towards the market. You can’t simply take everything into account when you try to make an educated decision. Filter the noise and focus on several key market components. For me, they are relative strength and earnings’ growth.

2. Common sense – create a trading system that is designed on the basis of proven trading anomaly. For example, trend following in different time frames.

3. Flexibility – be open to opportunities in both directions of the market. Be ready to get long and short.

4. Selectivity – chose only trades with the best risk/reward ratio; stocks with the best set ups; it doesn’t make sense to risk a dollar to make a dollar.

5. Don’t overtrade – two or three well planned trades in a week (month) might be more than enough to achieve your income goals. Patiently wait fot the right set up to form and offers good risk/reward ratio.

6. Exit strategy – Always, absolutelly always have an exit strategy before you initiate a trade. Know at which point the market is telling you that you are wrong and do not hesitate to cut your losses short immediatelly. Don’t be afraid or ashamed to take a trading loss. Everyone has them. Just make sure that you keep their size to a minimum. (more…)

7 Things for Traders

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

The definition of man·age:number7

  • To direct or control the use of; handle.
  • To exert control over.
  • To make submissive to one’s authority, discipline, or persuasion.
  • To direct the affairs or interests of.
  • To succeed in accomplishing or achieving, especially with difficulty; contrive or arrange.

1. Traders must be great risk managers.

“At the end of the day, the most important thing is how good are you at risk control.” -Paul Tudor Jones

2. Traders must manage their own stress.

 Trade position sizes that keep your stress level manageable, if you can’t talk calmly to someone while trading you are trading too big.

3. Traders have to be able to manger their emotions, we have to trade our plan not our greed or fear

“There is nothing more important than your emotional balance.” – Jesse Livermore (more…)

7 Bad Habits of Traders

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

  1. Trading with no stop losses. You can’t control your profits but you can control and limit your losses with a planned exit. Not having an exit plan can be very expensive when a trend takes off against you and you start hoping instead of just cutting your losses and moving on.BAD-HABITS

  2. Your opinion can be very expensive. Trading your opinion against all other market participants can be very expensive. The market goes where it wants and when you disagree with where it is going it will cost you.
  3. “Egos are expensive things.” – Ray C. Freeman. Inflated egos cause a trader’s #1 priority to be proving they are right and refusing to admit when they are wrong. It is very expensive for ego gratification to be above making money.
  4. Trading off predictions can cost a lot of money when they are wrong. There is more to be made by reacting to what the market is doing instead of predicting what you think it will do later.
  5. Stubbornness causes small losses to become big losses. It causes a trader to make the same mistake over and over becasue they do not assimilate feedback they keep doing the same thing over and over and getting the same results.
  6. Not having an exit strategy for a winning trade can be very expensive, it is possible to ride a big winning trade into being a big loser if you do not have a set way to take profits. Trailing stops and targets can put the profits in the bank.

  7. Trading too big of position sizes for your account size can be very costly because no manner how good your winning trades are you are set up to give back the profits with a few big losing trades.

10 Essential Trading Words

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

1. Simplicity – have a simple, well defined way to generate trading ideas. Have a simple approach towards the market. You can’t take everything into account when you try to make an educated decision. Filter the noise and focus on several key market components. For me, they are relative strength and earnings’ growth.
2. Common sense – create a trading system that is designed on the basis of proven trading anomaly. For example, trend following in different time frames.
3. Flexibility – be open to opportunities in both directions of the market. Be ready to get long and short.
4. Selectivity – chose only trades with the best risk/reward ratio; stocks with the best set ups; it doesn’t make sense to risk a dollar to make a dollar.
5. Don’t overtrade – two or three well planned trades in a week (month) might be more than enough to achieve your income goals. Patiently wait fot the right set up to form and to offer good risk/reward ratio.
6. Exit strategy – Always, absolutelly always have an exit strategy before you initiate a trade. Know at which point the market is telling you that you are wrong and do not hesitate to cut your losses short immediatelly. Don’t be afraid or ashamed to take a trading loss. Everyone has them. Just make sure that you keep their size to a minimum.
7. Let’s profits run – one or two good trades might make your month. One or two good months might make your year. Letting profits run is as important as cutting losses short. Bigger winners will allow you the luxury to be right in less than half of the trades and still be profitable.
8. Consistency – Stick to your method of trading ideas’ generation.
9. Specialize – Specialize in one or two distinct setups. It could be a combination of technicals and fundamentals, certain timeframe or special event as a trading catalyst, certain sector or trading vehicle.
10. Have a plan – Which are the stocks that you will be paying special attention to – this week, today. Why those stocks? In which direction you expect them to continue their move? What will give you a clue for the beginning of the move? Follow them exclusivelly and enter without a hesitation when they give you a signal. Don’t just wake up and sit in front of your monitor without having a clue what you are going to trade today.

18 Trading Wisdom Thoughts for Traders

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

1. You will be tested mentally and emotionally this is not for the weak minded.

 2. Master Traders are detached emotionally from profit or loss. 
3. Boredom is the enemy of the master opportunist.

 4. Haste is the enemy of great entry points.

5. Doubt is often followed by a lost opportunity.

6. The Trend will give you direction on your path.

 7. Having an exit strategy prevents unnecessary pain.
8. The laws of probability give strength to your fingers.

 9. Going against momentum brings forth the fools reward.

 10. Better the bad trade that is unrewarding.

 11. Habit is built on the principles of probability.

12. Know your exit point in the worst case scenario first.
13. The master trader is an escape artist.
14. When one knows the present they master the futures.

 15. Set realistic goals and let the good times role.
16. A loss can be turned into a win when one is swift.
17. A master in day trading trades in an egoless state.

 18. Times of great probability are like diamonds falling from the sky.

Day Trading Mistakes

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

There are some major day trading mistakes that just about every new trader will make early on in their career.  The ones who survive are those who can recognize these mistakes and take corrective action.

The first mistake many day traders make is to skip the planning phase of the day or a trade.  Every day you sit down in front of your monitors you should have a general plan for the day.  You should understand the major trends and support/resistance of the major indices, and the stocks you plan on trading.  In addition to that, once you see your stock setting up for a trade you should have a plan that includes an entry, a target and a stop-loss before you even pull the trigger on the trade.

Another mistake that we often see in day trading is the inability to exit on a losing trade.  If you have issues with getting out of the market when your pre-planned loss has been hit on your own, try using stop-loss orders.  Never. Never ever ever move a stop loss order once it’s been placed.  This requires some discipline but it will save you tons of money in the long run.  You should never be hoping that your stock will turn around, and go where you expected.  You should be executing your plan to the letter.

On a similar note, you also never want to move your targets.  If you keep moving your target away from the stock’s current price, you’re never going to take your profits.  A typical day trading exit strategy is to take profits at predetermined levels as you proceed into green territory.  This means that before you’ve entered the trade you’ve chosen two or more targets.  You exit a portion of your trade at each target.  Now, if you think your stock is going to trend for the day, you can plan for that too.  This is called a trade-to-hold.  It doesn’t mean you move your target, but rather you try to stay in the trend by setting a trailing stop.  A trailing stop can either be automatically set at a certain percentage or point value behind the stock price, or you can mechanically keep moving your stop loss up to obvious points of resistance or support behind your trending stock. (more…)

John Paulson's 8 Secrets

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #
  1. Don’t follow the crowd.
  2. Have an exit strategy before the bubbles burst
  3. Focus on the debt markets for predicting the future.
  4. Take the time to figure out how fancy new investment products like credit default swaps (CDS) work.
  5. Buy insurance. No one wanted out of the money puts on the housing market.
  6. Remember the past. Some of the big winners in the housing crash were those dismissed as out-of-touch dinosaurs.
  7. Remember that no trade lasts forever so don’t fall in love with your investment. After making his $20 billion. Paulson went long banks at the bottom. (The verdict is still out on this trade).
  8. Timing is everything and luck helps.
Go to top