What I learnt in a year of trading stocks

Vindago · May 3, 2015

I am starting this thread with the objective of sharing the hard learnt lessons of one year in the trading business and see if other trader followed a similar path or what they did differently.

1) I now trade small until my trading become consistently profitable (this may last for years, unfortunately). it seems obvious but it was not so obvious to me (and I suspect to many other new traders). Had I done this my account would be in a much better shape!

2) I now focus on loosing well instead of winning big as for sure once I have control on the losses I can start focusing on winning, the opposite may just lead to disaster (it has for me). This is the hardest as I am in the trading business to make money so it seems so unnatural to spend much time in ingraining protective automatism in my thick brain so that when I open a trade I should first and foremost know that whatever happen with the trade I will not loose much money, then if the trade turns out to be a winner i will even make some money!

3) I now understand that the market is not random, price move for good reasons, I believe that I now have some insight in the reasons but I am still struggling with the mechanics. This is key as it allow me to identify low risk entry points (as I said I am still struggling with the mechanics and thus I am working on fine tuning these entry points).

there are many other things I have learnt but the above are the ones i am focusing on at this time.

Handle123 · May 4, 2015

1) Do you make entries based on Fundamentals, or indicators or Price charts?

I started long ago and old timers did much of fundamentals with moving average thrown in, and all used weekly charts. I still pretty much use same approach but without fundamentals. Seldom will I trade non-dividend & non-optionable Longs. Normally, I will take $1-5 out of the stock on half and rest at breakeven plus fees(better than breakeven), I never trail stops once I get to breakeven, then after this, I continue to look for very deep retracement trades to add onto a good trend. I do use "Time Stops" so after three weeks if I am not at breakeven stop, my target is where I got in and if stock looks bad, I will then sell call options if protective stop is hit and do Debit Spreads to try to recover some of the loss. If you learn about options along with trading stocks, you can reduce some of the risk and add to bottom line as well, plus using dividend stocks for longer term plays adds up as well.

Vindago · May 4, 2015

Hi H123, I trade what I see, I do not use indicators, I only look at the way price is moving in real time. I do not trade Options, I never bothered to understand how they work since I think I have quite enough on my plate with Stocks.
I use Stops (not trail stops as they cannot possibly work) that are initially positioned away from entry point (to avoid spikes) and I move them very close to the entry point (and keep moving them close to price as the trade progress) once the trade is confirmed, if the trade is not confirmed I exit it without the need of the Stop so the stop is there to protect me from unusual event (like Fed announcements etc.).
Also I mostly day trade as I have not spent time figuring out swing trading yet (I am planning to do that once I am consistently profitable with day trading).

in general I try to KISS (Keep It Simple Stupid) as trading is hard enough that I do not want to add complications through use of Indicators etc.

Vindago · May 7, 2015

Most recent discovery and the one that will make all the difference: forget the finger and look at the Moon!!! it is so Obvious that it is unbelievable it took me more that a year to get it...

gkishot · May 7, 2015

Vindago said:
Hi H123, I trade what I see, I do not use indicators, I only look at the way price is moving in real time. I do not trade Options, I never bothered to understand how they work since I think I have quite enough on my plate with Stocks.
I use Stops (not trail stops as they cannot possibly work) that are initially positioned away from entry point (to avoid spikes) and I move them very close to the entry point (and keep moving them close to price as the trade progress) once the trade is confirmed, if the trade is not confirmed I exit it without the need of the Stop so the stop is there to protect me from unusual event (like Fed announcements etc.).
Also I mostly day trade as I have not spent time figuring out swing trading yet (I am planning to do that once I am consistently profitable with day trading).

in general I try to KISS (Keep It Simple Stupid) as trading is hard enough that I do not want to add complications through use of Indicators etc.

you will be better off just with buy and hold

Vindago · May 9, 2015

gkishot said:
you will be better off just with buy and hold

Yes GK, but the devil is in the details: when and where is the place to buy and when and where is the place to stop holding...

I now know that I cannot know for sure but I know where and when is more likely and if wrong it matter not as I also know that I do not need to lose much since if I am wrong, I am wrong and there is no hope that that can change, it is Obvious, no?

gkishot · May 9, 2015

Vindago said:
Yes GK, but the devil is in the details: when and where is the place to buy and when and where is the place to stop holding...

I now know that I cannot know for sure but I know where and when is more likely and if wrong it matter not as I also know that I do not need to lose much since if I am wrong, I am wrong and there is no hope that that can change, it is Obvious, no?

You will be better off if you buy and hold ( forever ) broad based indices like MDY.

Vindago · May 16, 2015

OK, a bit more on how I think:

Trading is gambling (obvious) as we cannot predict which way price will go, though we can and we must (to be a successful trader) learn to identify areas where price is most likely to reverse.
A trader need to learn to keep absolute Control on losing trades: until this is fully ingrained in its trading way day in day out, there is no chance to make money consistently
To keep losing trades under Control Traders need to let go (this is unbelievably hard as the Ego get in the way) and fully accept that losing is an integral part of trading
Once the trader has let go and accepted that loosing is OK he can focus on where and when is best to place his bets and then just wait for the trade to play out, if wrong he knows that he will lose a little money, however, if right he will make way more money
letting go will allow to place a bet without too much stress and will result in fewer missed opportunities as if a trader is hindered by fear of loosing money he will not react in time to take the winning trade
To identify Where to place the bet is important to notice that there are some price levels that are more significant than others, one a trader learn to identify these he will know where to focus his attention before putting his bets
To identify When to focus the attention for a possible betting area the Trader needs to clock the market as Time=Money (in a very literal sense!)
Once a bet is in and is moving in the right direction a trader can estimate the possible range by using the clock and those special price levels (here also less significant price levels may become important)
Most of all, once in a winning trade it is important to keep track of time and be ready to get the hell out if the time is right and Price action is in agreement with the ending of the semi cycle.

good trading...