This post is for people who are struggling with their trading & investing, not being profitable and finding themselves working extremely hard to no effect. I found very interesting a recent post \'Who uses stop losses?\' and the various replies about how stops are necessary, professional, business-like, etc. That post and the ensuing comments confirmed what I already knew: the retail trading crowd thinks and acts like a flock of sheep. Books and information about trading all say the same things. They emphasize money management, tell you that it is stupid to average down, tell you to use stop losses, risk 1% of your account, and other common propaganda. The interesting thing is that people who talk about the value of stops, money management, etc. appear to have gotten their ideas from a book. This include the authors of those same books! It is a never ending process, a constant recycling of bad ideas. I think that those who write trading books that explain how to trade aren\'t particularly good traders themselves. Why? I think you must embrace uncertainty to succeed as a trader. Those who write books, teach seminars and so forth are just trying to find a way to make money with certainty because they can\'t trust their own trading to do it or because they cannot live with the ambiguity and uncertainty of constant involvement with the market. These ideologies that trading books offer are accepted as trading wisdom in the community of amateur traders. I was fed all this when I was learning to trade. But I got lucky. A very successful trader told me early on in my career that 95% of traders fail. Therefore, to succeed he said that you have to do the opposite of what they do, you have to think outside of the box. I\'ve always tried to think in a unique and different way from other traders and I believe this is in large part responsible for my success. All across the internet and in all books about trading you will find the following assertions: High probability setups + Discipline = Success Always use stop loss orders. Have a specific risk-reward ratio in mind. Know exactly what you will risk in every trade It is stupid to have a risk-reward ratio of less than 1:1 It is stupid to aim for very high win percentages The entry price is the most important detail. Almost all amateur traders buy into this ideology. Why? These rules produce the illusion of certainty in the market place. You know your risk and that\'s it. There is no chance of becoming emotional because you failed to use a stop and therefore busted out you brokerage account. You don\'t have to worry about having to explain to your husband, wife, or friends that you are not as big an idiot as you seem to be, that trading is still something worth doing. But in the market certainty doesn\'t exist. Any rule that produces the illusion of certainty just makes it easier to fail as a trader. Admittedly I went through a phase of having a set risk-reward ratio (1:2) and risking 1% of my account, thus calculating my position size must be (x). My stop loss was frequently hit. I was going nowhere fast. I printed off all the trades I ever did and analyzed them in detail, trying to find what went wrong. I came to some conclusions: read the rest of the entry on my blog:
www.wangel2210.blogspot.com
As i read and research, I realise there is a few school of thoughts in trading. The more common ones are: Use technical analysis(charts reading etc) plus fundemental research (annual reports, sector reports, statstic, know the management, etc) Follow the insider trading. Use marco-economic data, (money supply, ecomic figures, interest rate etc.) Well, neither seem to work for me really well although I believe the value of acquiring these analtical skills. I admits I am a rookie when trading is concerned, but if i were to list the order of importance, I would rank marco economic data first. The 3 crisis over the decade has showed that the stock market really spare no one when the tide is sinking, even if the company fundemental is good, the only exception is hyflux during the sars crisis. The respectable gains i made from the stock markets is during the 3 crisis, because i buy when people is selling. However, i realise no one can stay in the sideline waiting for a crisis to happen, I when i do went into the stock in an non-crsis period, my loss is hugh. I bought CAO before it collapse, well done, all my capital is almost gone. So everyday as i read comments of forumers on nextinsight, the comments i really wished to read about is actually how to european crisis will pan out, the jobless encominic recovery in US, how long will it last? Why people see the slowing of china economic growth as a bad thing (10.3% is more than 8%, the official figure to prevent social unrest, and isn\'t anything more than 10% a risk to overheating). sadly there isn\'t much articles on these. Although I do gather that a double dip is ruled out in 2010. NOt sure if anyone share my thoughts or has any answers/views to the questions i posted above. The european crisis seem to have its worst behind them, their currency strengthen, only a fraction of the banks fail the stress test, spain managed to raise funds from the open market, but the fed comments that economic recovery is unusally unpredictable. Why? Its only recently that the fed mentioned that the economic recovery is on strong footing. For me, \"tide\"trading works, leaving the market when a storm is gathering, entering to pick up the pieces. So if my views is of any value, I think the worst of storm is over, when the US economic emerges from the recession due to sept 11, they also have a long period of joblessness, and they also have a lot of mix signals on the economy. If we wait for all the signals to point the wrong direction, we would have miss the boat
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