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Tuesday, October 12, 2010

Lesson to learn: know when not to trade

I am trading over a year now. I know what I am doing only for about 10 months. Before that I was only supplying money to the market :)
Thinking back and analyzing my trading statistics I notice that there are periods when I should not trade. I know that my trading style is not a holy grail that works every time and in all market conditions. But how can I recognize those bad periods before or during them, not after they end or when I look at my account?

September was a good month for me. I saw how a really good (for my trading style) market should look like: many nice setups, all working nicely, profit coming easy and stress-free. These are conditions that I should trade in and I should not trade if otherwise.
But how can I recognize that "otherwise"? I cannot measure stress or the ease of profit. Anyway these would be after-fact values, so it is not worth to consider. Maybe I should think about numbers of nice setups vs failed setups. This is a topic to think. Any ideas?

Friday, May 21, 2010

My First Bear Market

I hate it! I hate it! I hate it!
When I short market bounces, when I try catch bounce market goes down. When I paper trade everything works perfect, when I put money I loose. It doesn't matter how wide stop is, but it always gets hit and then price reverses.
One way or another I will learn how to make money in a bear market. I hope my account will survive my learning.

Saturday, March 27, 2010

Main mistake: wrong approach to stop loss

I used to think that my stop was wrong if stock price goes higher after it was sold. I was afraid to use tight stops because they often were hit. I was looking for various excuses why I should not use stops at all. And we all know that this is the shortest way to loosing money.

On the second day of Stewie's service I understood that my main mistake was my approach to stop loss. There is no bad or wrong stop! All stops are good! Even if they close your position at the bottom and then the price go up for 20%, still the stops are good and at the right price! It doesn't matter how high or low I sell, but after a day, month or year the price will be higher. I am not a long time investor so I'll see higher prices all the time. So I better get used to that!

If you still feel bad using tight stops then please take into account the following:
1. How often tight stop would save you from 5% loss
2. How often it would stop you from earning 10% or 20% gain (take into account that your target would be met)

In my experience I don't find any case like no.2, but there are many cases like no.1