Decoding Markets and Marwood Research
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101 Lessons For Aspiring Traders PDF
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12 Always give your trades enough time to come good. Never make a trade, change your mind for little to no reason and take it off. That will only destroy your confidence and eat into your profits. You should have a solid plan for every trade you make and stick to it. However, that doesn’t mean you can’t change your mind when new information comes in. This should all be considered in your plan. As Keynes said ‘when facts change, I change my mind.’ 13 14 Fundamental analysis can give you the extra confidence you need to sit with a good trade once you’ve put it on. But fundamental indicators need to be understood correctly. For example, always look at P/E ratios in relation to growth. A stock that has a P/E of 20 and a growth rate of 40% is undervalued. This equates to a PEG ratio of 0.5. Similarly, a P/E of 5 is not cheap if the growth rate is zero. The difference between an amateur trader and a professional is that the amateur trades frequently and tries his luck on every trade. The professional waits patiently for the perfect opportunity to line up then executes with confidence and aggression. 15 16 17 18 19 Be weary of generalisations and narrow mindedness. There are many different opinions in the stock market and many are false or out of date. The only way to know what works is to test your hypothesis and see how many times you get it right. It’s perilous to stick with a losing trading system but it’s also not a good idea to keep hopping from one strategy to the next. Think about the underlying principles that govern markets and work towards refining a strategy that shows promise. Never assume that you know everything there is to know. There is always more research that can be done. Always seek out the other side’s argument. In other words, if you are ready to buy a stock, why is someone willing to sell it to you at that price? HFT and algorithms make it almost impossible to compete on certain strategies such as trading news releases. Better to think ahead and consider how markets will react to the coming news and how you can position yourself ahead of the event or against the consensus view. Successful trading takes time. It took some of the best traders in the world more than 10 years before they finally found a profitable strategy. 101 LESSONS FOR ASPIRING TRADERS Technical indicators are inherently lagging so they cannot be relied upon on their own. They are mostly useful for gauging market sentiment and assisting with risk control. They can also be incorporated (in different ways) into quantitative strategies. Download 1.87 Mb. Do'stlaringiz bilan baham: |
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