The Road to Successful Trading

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Table of Contents 
 
Chapter 1: Introduction 4 
How to define your trading “destination” 5 
What is a Successful Trader? 6 
Chapter 2: The Strategic Philosophy of Trading 8 
Identifying High Probability Trades 9 
Risk-Reward 10 
The Trading System 10 
Chapter 3: Developing your Personal Profile 12 
Personal Goals 13 
Trading capital and financial objectives 15 
Establishing your risk profile 17 
Personal Risk Profile questionnaire 18 
Identifying your Strengths and Weaknesses 19 
Attitude 20 
Imagining your worst trading nightmare 20 
Writing out your trading premise 21 
Example trading premise…21 
Chapter 4: Developing an Effective Trading Strategy 22 
Full or part time trading? 22 
Round-the-clock trading 23 
Trading Style 23 
Example of a Position Trade 22 
Example of a Day Trade 23 
Example of Scalping 23 
Example of Swing Trading 24 
Chapter 5: Trading System and Trading Rules 26 
Fundamental Analysis 27 
The Balance Sheet…27 
The current ratio 28 
The Operating Statement 29 
Price-Earnings ratio (P/E) 29 
How to estimate the future value of stock shares using P/E Multiple 29 
Return on Investment (ROI) or Return on Equity (ROE) 30 
Quarterly and Annual Reports 30 
Fundamentals for other types of investment 31 
Technical Analysis 31 
How to Design and Construct An Effective Trading Plan 
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Charting 31 
Moving Averages 32 
Simple moving average (SMA) 32 
Trend Identification/Confirmation 34 
Support and Resistance Levels 35 
Moving Average Convergence Divergence – MACD 35 
On Balance Volume 36 
Bollinger Bands 36 
Relative Strength Index 37 
Divergence 37 
Selection Filters 38 
Sample Trade Selection 39 
The Importance of Paper Trading…41 
Trading System, Trading Rules and the Trading Plan 42 
Example of Trading Rules 43