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The Secret That Makes For a Successful Trader

strudy — Fri, 04 Jul 2008 08:19:38 GMT

There are hundred of articles and books that will tell you how to trade successfully.How to look out for certain charting signals which will tell you when it is the right time to buy.

Of course you do your own research. Of course you buy when the stock is trending upwards.Etc .You stick to your preset plan of when to sell at the best profit possible.You do everything that they tell you to do and more besides.

Then you can have purchased the best software program available, which has cost you thousands of dollars.

Then you also subscribe to to the numerous newsletters and listen to expert advisors who will tell you what to buy and when to buy .All for a substantial fee of course.:sly:

Even with all this going for you is there any guarantee that you will be a success? I am afraid the answer is a resounding NO!:eek7:

By doing everything above you have given yourself a better chance of being a successful share trader than the amateur. But without that �Secret Ingredient�you are doomed to eventual failure, for the odds are stacked against you.:mad:

Have you figured out yet what it is? Without this knowledge you are almost doomed to failure.

What I am about to tell you will make a big difference towards your trading success.For without it you hard earned starting up capital will be lost very quickly.

Ok! you have twisted my arm.

The Secret is nothing more simpler than Risk Control.

The successful trader accepts risk as an inescapable fact of life while he is trading in the market.It is his devotion to risk management that will determine his trading success.

.I shall explain in more depth how important managing risk is.For without it your days in the trading market are numbered.

The very first thing you must look at is Your Own Attitude To Risk. It is essential to know exactly how you react to risk and what sort of trader you are. I am afraid I cannot help you here.For it is a decision that you alone and you alone can make.Now for a closer look at risk.

It is of vital importance that each and every trade has to be assessed individually for the risks vary with each separate stock.

We shall assume that you have done your basic research before you picked this particular stock to invest/risk your capital in.

The next thing you have to look at is the stock itself. Take a look at todays' chart and you will find that the stock can only go in one of three directions.i.e. that is upwards,downwards or sideways. If it is it is going steadily upwards the risk of it going downwards are already reduced in your favour.

Understanding charting activity plays an important part in risk management because it reveals possibilities and gives you more choices.

I also employ a probability factor scale, you can adjust the percentages to suit your own risk tolerance.It is basically this:-

1. If the stock is currently going upwards it has 70% chance of continuing upwards, a 20%chance of going sideways and a10% chance of going downwards.

2..If the stock is trending sideways it has 50% chance of going up or down.An even money bet in other words

3. If the stock is trending downwards then it has a 70% chance of continuing downwards. 20% chance of going sideways and a 10% chance of going upwards.

Of course there are no guarantees but it effectively reduces some, but not all of the risk factor in your favour.

You have secondly have to look at the �Time Factors� involved .For Time is the most difficult risk variable in your trading plan.

1. How long will will the trade take to complete? Is it a short trade measuring days or is it of a longer duration?

For the longer the trade is open the more chance the market has of turning against you.For you have no idea which future events may influence your stocks share price.

For it is the activity in the market itself which determines the outcome of your stock,that is whether the share price goes up or down.

2. Two constant companions in the stock market are Fear and Greed. Let these two emotions govern your trading and your risk factor has just been multiplied astronomically.

So be aware of how they can effect your trading. either by paralysing you or by keeping you in that trade little bit longer than you should have been.
Letting your emotions rule your trading is a sure fire way to financial ruin.:banghead:

3. Employ a stop loss to minimise your losses and use a trailing stop loss to lock in any profit you may have already made.

4. Use the 2% rule.That is limit the risk on ant single trrade yo no more than 2%of total trading or portfolio capital i.e $100,000 capital means that we lose no more than $2,000.

The correct application of the 2% rule may mean the loss in a single individual trade may grow to to 10% or 30%. However it will not exceed the dollar amount of $2,000

5. Diversify! This means basically spreading your investments, this spreads your risk.Do not trade just in resource or mining stocks.But have some exposure to other areas of investment.

As you may have noticed some sectors in the market have already been hit harder than others.

Learn by your past experiences or better still the experience of others .Remember each trade is just one of a series of probabilities and your success or the lack of it is determined by how you use that �Secret Ingredient� Risk Management.
The higher the rewards, the higher the risk Only if you do nothing to manage risk.

9. Golden Rules Of Share Trading.

strudy — Thu, 03 Jul 2008 06:38:18 GMT

Golden Rules Of Trading.

1. Stick to the rules.

Believe it or not this is the hardest rule. The trader will keep breaking this one time and time again.

As I have mentioned recently, every time that I have strayed away from my trading plan I have always lost money.

2. Diversify.

Don�t have all your eggs in one basket. Buy from a couple of areas, not just the one sector i.e. mining.

3. Buy shares that suit your trading style.

If you are buying shares for long term, obviously this won�t suit you if you are a short-term trader. And vice versa, shares for short term won�t suit if you are a medium to long term trader.

4. Know your risk tolerance.:confused:

A speculative share has a different risk profile to an out-of-favor blue chip. Therefore allocate your capital according to the risk profile of the trade and your own personal risk tolerance.
This is a personal decision that only you can make.

5. Don�t rush in.:banghead:

All investor�s particularly new ones should take their time and learn about the market before
they start trading.

A good way is to �paper trade� first so as so as to learn the basics first.

The market will still be there waiting for you for when you are ready to trade.

6. Don�t get greedy.

Do not expect unrealistic returns.10- 15 % is a good figure to aim for.

Don�t think this is easy, and get over confident and think that you will be a millionaire overnight. It is all too easy to lose money on the stock market.

7. Only invest what you can afford to lose.

If the share is causing you lose sleep or it is worrying you. The reasons could be that you ether own too many of them or it is the wrong type of investment that suits you.

Sell them! Peace of mind is very important. You don�t need the unnecessary stress.

8. Never, ever chase shares.:banghead:

Never go beyond the limits that you have set.
If you exercise a little patience you will usually be able to buy shares below your limit. The cents saved on your buying and selling will add up by the end of the year.

9. Keep accurate up to date records.

This is most important, particularly at taxation time. For the penalties for not declaring your profits and not paying your capital gains tax�s are formidable.

As I have said before the hardest rule is to stick by them. But believe me it is worth the effort.
I hope these �Golden Rules� make you some �gold� in the rear future.
________________________________________
Strudy is a keen successful share trader on the Australian Stock Market. Visit his weblogs for more free articles and useful information at both http://www.asxnewbie.com and http://www.aussiewealthreview.com you just never know what �Golden Information� you will find there.

9. Golden Rules Of Share Trading.

strudy — Thu, 03 Jul 2008 06:35:55 GMT

One of the worst days in some time

kennas — Thu, 03 Jul 2008 02:11:49 GMT

Eeeeek!!!

I'm holding everything, and expect a bounce at some time, in the next 5 years or so!!!

Eeeeeek!!

Selling right now is stupidity IMHO.

Can't believe the lemmings....

You lemmings should have sold ages ago!!!!!!!!!!!!!!!!!

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CGG

kennas — Wed, 02 Jul 2008 01:59:04 GMT

Bought into CGG today at 37c on the announcement.

Have been watching for yonks and this tipped me over the edge.

See thread for ann and discussions with jman.

Big MC already, but on potential, looks cheap.

Could have a $1-1.5b mc (or more) just on one of it's deposits going into production.

Currently under $400m.

FY 07/08 Return

kennas — Sun, 29 Jun 2008 21:15:55 GMT

Well, it's been a tough FY year for the general markets.

Where is it? Back to the start I think? Golly lower...

Started at 6300 ish, and ended at 5350. So market down 15%.

I've had a few lucky punts I think (MAK/O) and some great losses (KMN) but overall have returned 33%. (pre tax!)

Not sure how I feel about the 08 performance. There were so many great spec opportunites, but my investment plan is to always try and be conservative. And, that was my 2008 story. Just kept taking profits and cutting losses, and didn't over invest in anything. And, I have the feeling this year will be the same.

I suppose I can't be too upset with the outperformance given my conservative nature.

This is a different figure to my overall P&L noted in the last couple of updates as I've only just started adding in the closed trades P&L and overall graphs.

Will keep that running so it gives a fairer indication of % gain loss running through 08/09.

HTA alert ..... astrostuff update ..... :)

Trader Paul — Sun, 29 Jun 2008 15:28:51 GMT

:)

Hi folks,

HTA ... let's set the spinnaker on this one, for a run
on Thursday next, as a positive light is expected to
be focused on HTA, at that time ... :)

... technically, HTA has been making a V-bottom over the past
6 weeks, with increasing volumes, as well.

So, an equally sharp rally is expected, as HTA lifts off its lows ... !~!

have a great day

paul

:)

=====

MEI alert ..... astrostuff update ..... :)

Trader Paul — Sun, 29 Jun 2008 06:42:28 GMT

:)

Hi folks,

MEI ..... a confirmed morning star last week and a
positive time cycle early this week, should be
enough to keep this one moving upwards, though
some more volume would be nice ... !~!

Updated MEI chart, at:

http://forum.incrediblecharts.com/me...08-1626431.pdf

have a great day

paul

:)

=====

Crude oil ... astrostuff update ..... :)

Trader Paul — Sat, 28 Jun 2008 16:11:19 GMT

:)

Hi folks,

Looking at the oil price forecast, our astroanalysis has us expecting a few
negative cycles for the oil price in 2008, but fill your tanks now, because
it would not be surprising to see POO hit $200/bbl, in 2009.

Here's SOME of the time cycles expected for oil in 2008 and 2009:

August 2008 ... expecting negative cycles on 01-07-15082008

September 2008 ... expect 2 positive cycles 17-19092008

October 2008 ... volatile oil price in October and November 2008:

10-13102008 ... negative cycle

14102008 ... positive cycle

30102008 ... positive cycle

November 2008 ... 04-05112008 ... negative cycle

13-14112008 ... negative cycle

17-18112008 ... negative cycle

25-30112008 ... positive cycle

December 2008 ... 01122008 ... minor cycle

05-08122008 ... minor and positive news

12-16122008 ... 2 minor and positive cycles

26-29122008 ... 2 significant and positive cycles - strong POO

More later about POO in 2009, but here's a preview of timing for extreme
prices, next year ..... :)

21 May - July 10 2009 ... POO will likely make its first attack at peak prices,
followed by another try, particularly around 16-25122009 ... !~!

have a great weekend

paul

:)

=====

Positions update 28 June

kennas — Fri, 27 Jun 2008 17:12:37 GMT

Sold all IRC to lock in profits and get back some cash.

Bought more DMM on correction. Way undervalued for potential. Market doesn't like it yet for some reason. Perhaps drilling and potential upgrade to 100Mt DSO will provide the catalyst. Holding and hoping..

STB correcting. Disappointing. They need to start moving on their projects or they'll be a has been.

Holding MAK long term. Unless RP crashes, long term fundamentals compelling. Will reassess after June to see if I take some profits, or just ride it out.

LGL and NCM may be recovering with POG and being oversold.

Taken no profits on AZM, I think with further drilling results and initial JORC at Bepkong it will keep moving to a fairer value closer to 40c (on 1m oz confirmation). In the meantime, expect some natural consolidation, has moved a bit quick.

BFE will move once it starts to get publicised I think. Flying under the radar.

MLM having second thoughts about. I'm in it for the floats of Metrocoal and Cape Alumina, but I might as well just go through the public float. Doesn't seem that they are going to give a discount or much of an allocation to existing holders. Still undervalued, but the money may be better allocated elsewhere in the time being. Especially with it been held back under 60c...

KMN being rerated as it should be. Way undervalued on an MC to oz au equiv under $10. Rediculous. May take the opportunity to add more if uptrend confirmed.

BMN significant break up. Would buy more if I didn't want to be in more cash...:(

Not sure what to sell to get back into more cash. Maybe some LGL and NCM on any spike up. Or, a few AZM to lock in profits, or MAK after June... :confused:

Need to find a better balance in the portfolio with the most potential/undervalued and cash..

Watching CGG, I think it's a long term great asset, but not in my small cap criteria.

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The Third Oil Shock: Two Possible Outcomes

haunting — Fri, 27 Jun 2008 05:29:06 GMT

Check it out here. Two oil shocks, two recession. This time, it will be quite a miracle if a recession can be avoided. In fact, at this stage, whether there is an official acknowledgment of a recession or not, frankly is not that important. What matters is how soon the USA is able to dig itself out of the hole. Other than a recession, of course there's other worry the world has to contend with, for example, how is the USA going to cut down its debt? How are they going to pay back their debt to the creditors?

How about a devaluation of the US$?

Tough 2 months

kennas — Thu, 26 Jun 2008 02:05:52 GMT

Golly,

It's been a tough 2 months hasn't it! Well for me anyway. :(

I've been lucky enough to get into some good stocks early after the major correction but have watched some profits slide and slide the past 8 weeks.

MAK a prime example. I had a crap load of options that at $2.50 ish peak (effective buy 7c) were putting a smile on my face you wouldn't believe. Now converted to shares and slip sliding away.

Haven't wanted to sell for 2 reasons.

1. Fundamentally, into production worth at least double.

2. Didn't want the capital gain at end of year.

Otherwise,

LGL and NCM spanked!
Missed the top of IRC because of travel. Missed 20% more gain.
MLM capper holding it below 60!
KMN static.
DMM off from $1.10 to .70c
STB ok but looking tenuous.
BFE boring, so far.

Saving graces:

BMN recovering.
AZM up 100%.
ROY and GBG trades for 30% ish.

And, I think the market may make 4800 in the next 3 months. :eek7:

Will be taking profits where I can in the new FY...

STB

kennas — Thu, 26 Jun 2008 01:04:14 GMT

Dropping out of uptrend. Concerning for short term management of position.

They have lots of land with crap on it but aren't doing anything about it.

If poo product prices come off, as they should, might be punished.

Finger on the sell button.

DMM

kennas — Tue, 24 Jun 2008 03:01:48 GMT

Bought more at ave .73.

On known fundamentals, bargain.

Should eventually be a $500m ++ mc company. At least a 5 bagger.

MLM and Metrocoal and Cape Alumina

kennas — Sun, 22 Jun 2008 22:06:24 GMT

I see the floating of Metrocoal (MLM 100%)(pending satisfactory drilling currently underway) and Cape Alumina (40% MLM) as a massive upside surprise to the market once the listings are approved and taken forward.

He's some detail on Metrocoal from their website:

Metrocoal

Queensland Focussed - One of the Best Coal Regions in the World Metrocoal Ltd. is an Australian�based mineral exploration company focused on its coal projects in the Surat Coal Basin locations of South East Queensland
Currently privately owned subsidiary of ASX listed Metallica Minerals Limited.

The 100% owned project tenements cover a total of 4,000 km� in Queensland�s productive coal region and have extensive coal bearing strata 3 coal projects (Surat, Ipswich & Injune) with extensive coal bearing strata targeting depths 130m - 300m for Underground Coal Gasification (UCG) as well as open pit coal potential <100m

100% owned tenements.

Value Adding Strategy

Utilising "new" technologies (Underground Coal Gasification - UCG) Spinoff of divestment from successful ASX listed Nickel focused company (ASX � MLM)

Proven Brisbane based team.

Metrocoal has an Edge �Latest� technology enhances portfolio High hydrogen Surat Basin coal suits CTL and Coal Gasification.

Previous work on tenements provides confidence of there being extensive and exploitable coal deposits and data base for further work.

Exploration Target > 1Bt Coal
<300m depth + seam thickness 3m

Metrocoal Summary

Shallow, deep coal utilising UCG technologies
4,000km� coal tenements in currently under utilised but coal-rich Surat Basin.

Excellent locations for infrastructure.

Low sovereign risk.

Experienced team with successful ASX track record.

Clear strategy for diversified growth in Southeast Qld Coal and Energy.

Cape Alumina:

An initial resource statement released in January 2007 of 54 million tonnes of indicated
and inferred in-situ bauxite. Further drilling aimed at defining 10-15 year mine life
based on 7mtpa of pisolitic bauxite production.

Economics

Export Export revenue of A$250m-$300m pa (subject to positive feasibility study). Export
Sales proposed to Xinfa, one of China�s largest bauxite importers and other Chinese alumina majors.

What's 40% of just that mean for MLM?
How they can be trading at this MC is a bit odd.

Looking forward to drill results and getting on board the IPOs!