Trading strategy - How many do you need? - Aussie Stock Forums

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  1. #1

    Default Trading strategy - How many do you need?

    According to Linda Raschke (of LBRGroup and MarketWizard), you only have to learn three trading setups to earn yourself a living trading.

    Here's a tip from another guy. I thought this is a good article.......
    (Disclaimer: I have no interest in the author's business)

    Trading: Focus On One Strategy And Get Good At It

    The thrill and optimistic hope of making money can be purely addicting.

    Iíve had many students make requests for my thoughts about the challenge and difficulties that I have faced as a trader. I think itís very safe for me to say trading is hard. A mentor of mine taught me a valuable lesson.

    Now I would like to teach you the same lesson. Once I understood this lesson, the market and trading became easy, less stressful, less consuming and even more interesting.

    I can sum up the market in two words: Information overload. In 2013, this information is coming in from more places, more sources and more directions quicker and more direct than ever. Websites, articles, newsletters, blogs, special reports, write upís, breaking news, Twitter, Youtube, Facebook, LinkendIn, Google+, Bebo, Etoro, Formspring, Flickr, and Pinterest, TV, Radio, cell phone, the internet in general!

    There is so much information in this world, and traders have a very specific interest: ďHow do I make money trading?Ē So many traders are excited to assimilate all this information in something thatís quick, understandable and easy to read. They create, use and/or rely on something called indicators, but even indicators can be complicated.

    You have the rate of change oscillator, Relative Strength Indicator, MACD, Stochastics, Trend Deviation, Liner Regression, R-square, Volume ROC, Chaikin Money Flow, Chande Momentum Oscillator, Commodity Channel Index, Williams %r, Qstick, Bollinger Bands, Average Directional Index, exponential moving averages, simple moving averages, Fibonacci averages, adaptive moving averages, long term moving averages and thatís just naming a FEW! The indicators above can be used, changed and updated into literally countless different settings and uses.

    If you are a little frustrated, confused and a tad overwhelmed after reading the last paragraph, it was intentional. My grandma used to say ďthe proof is in the pudding.Ē She made great pudding by the way, and peanut butter and jelly sandwiches. To this day, Iíve never had a comparable one. However, the market is and can overwhelm you or any other trader if you let it.

    When you first start trading, or begin to learn, this entire new world opens up. The truth is there are more opportunities every single day, more than you can take advantage of in a lifetime. Thatís lesson number one. Lesson number two: the market rewards the specialist.

    What exactly does that mean? Think about it. All of the highest paid professions are those that have very specific interests and a specific focus. Take athletes for example. An athlete plays for a team but has one job, one overall focus, one real specialty. The athlete practices that one function, over and over and over and over and over. Perfect practice yields better results and that athlete now has the muscle memory to produce raw talent anytime itís needed.

    The market rewards the specialist, not the generalist. When I say focus on something, focus on ONE thing and get really good at it.

    Just one, thatís all I ask; your focus can be anything. Maybe you only trade double tops and double bottoms. Maybe you want to specialize in Bollinger Bands. Maybe you want to day trade. Have one strategy and one plan. Pick one subset of the market. Make it as small and granular as you like. Perhaps you only trade the 2nd bounce off of the 20 exponential moving average, you only buy call options and you sell at a 30% ROI.

    Do one thing, pick one thing, master it and do it over and over and over and over and over. You will get really good at it and you will begin to make money with it. It can be ANYTHING you want.

    Master it and the market will reward you. I finally understood and figured out my mastery after a year of losing money hand over fist: candlesticks. From that, I used it to master my first strategy: credit spreads, and then covered calls. Those strategies are what some would call ďboring,Ē ďslowĒ and ďconservativeĒ but they work, they are easy, they are simple and Iíve mastered them.

    Now that I have mastered those three things, for the rest of my trading career I have a trading plan, a focus, and I can consistently make money. My advice: take everything you are doing and scale it back radically. If you are stressed, over trading and losing money, itís because you are juggling too many things...and you donít know how to juggle, do you? Find the one thing you want to master, focus on it, get good at it and our beautiful vixen ďthe stock marketĒ will reward you. Remember, before you trade, learn to TradeSmart.


  2. #2

    Default Re: Trading strategy - How many do you need?

    This sort of generalized rubbish won't help you trade profitably.

  3. #3
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    Default Re: Trading strategy - How many do you need?

    Quote Originally Posted by tech/a View Post
    This sort of generalized rubbish won't help you trade profitably.
    I think once someone has traded for a while he/she can reflect on these generalised statements and make improvements to certain areas. Their usefulness is however limited to a greener trader.

    I also think there's a mis-use of the term strategy when he's only referring to setup.

  4. #4

    Default Re: Trading strategy - How many do you need?

    Quote Originally Posted by tech/a View Post
    This sort of generalized rubbish won't help you trade profitably.
    I thought the article was very good - it reminds people to keep it simple, and to stick to a tested strategy.

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