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| TRADING TECHNIQUES |
SUFFICIENT TRADING CAPITAL Use only sixty percent of capital to be commited as margin requirement for all trades. Use not more than twenty five percent of capital in one trade. Limit loss on any single trade to twenty percent of the total equity. RISK AND REWARDS Determine profit potential and risk factor, before entering the market ; The prospective profit should be three times or more than the possible loss. TRADING STRATEGY Identify your objective and plan what you are going to initiate. Decide on a method of operation and have the ability to stick to it. Must be flexible or have an open mind and change your market position if circumstances changes and when losses are incured. Can't be right all the time : Willing to cut loss must be part of your trading plan. Only enter, after careful study and have patience to wait for a trend to form or a reversal after a major move. study all market information objectively, no personal attachment to news or statistics. WHEN IN DOUBT, STAY OUT Don't feel that you have to be in the market all the time and don't be tempted by price movement. CUT OUR LOSSES SHORT AND LET YOUR PROFIT RUN Most important cardinal principle. Sound easy, but most do the opposite. hurts to cut loss, either egoistic or against human nature. Hard to admit mistake. Some say the market is wrong, they are right and the market will correct itself soon ; What happens if it doesn't. When making profit, tendency to take profit readily and worrues about market eroding profit. Trading number of times profitable to exceed the number of times of losses and ends up profitable is the secret to successful trading. Two techniques for limiting losses and ridding profits : A. Stay with a profitable trend. Don't think it is high or low. B. Predetermined maximum acceptable loss and decide on placing a stop loss order. DON'T FIGHT THE TREND, THE TREND IS YOUR FRIEND Must act in accordance with confirmation of technical trends ; Don't go against it. INCREASING A POSITION , NEVER ADD TO A LOSING POSITION Only add position if you have a floating profit on your initial position. ADDITIONAL TRADING ADVICE You need to have an objective temperament to trade. Able to control your emotions and need not worry about your position in the market. Able to judge or evaluate everchanging conditions, combined with sound analysis. Any plan will miss some opportunity - Don't feel bad after cutting loss, if the market moves back to your favour in the position you have liquidated. WHO WINS, WHO LOSES, WHY? |
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