PART 1: Self-Assessment
1. How much time in a day do you have devote to trading?
>8 hours
2. When you are trading, how many distractions do you expect to have?
>One - phone calls
3. How much time do you expect to devote to developing your trading system, to doing your personal psychological work, and to working on your business plan for trading?
>Developing system - every weekend
Personal psychology - everyday
Business Plan - monthly
4. What are your computer skills? What skills do you need before you begin this trading venture?
>Excel Spreadsheet
5. What do you know about statistics? What you need to know in statistics?
>Multivariate statistics. Market Hypothesis testing.
6. How would you rate your market knowledge?
>Poor.
I still need to understand trading mechanics, what moves the market, how to execute orders effectively at low cost, any trading indicators that I might need.
7. What are your psychological strengths and weaknesses in terms of personal discipline?
>Might not follow stop loss signal.
Too anxious and impatient when there is no entry or exit signals for consecutive few days.
8. Do you tend to get compulsive (caught up in the excitement of trading)? Or do you have emotional issues that constantly crop up, such as fear or anger?
>Impatience.
9. What do you need to learn, accomplish or solve prior to beginning trading? How will you do that?
>I need to learn to discipline myself so that I do not get impatience and enter/exit unnecessarily. Also need to have a trading system, risk management system, recording and evaluation systems being mapped out.
PART 2 : Defining Objectives
1. What is your advantage or edge in trading? What is the particular concept that you are trading that gives you an advantage?
>Swing trading only at this moment. Not for Breakouts yet.
2. How much money can you afford to lose? How much risk can you afford to take on each trade?
>$10k in total. Risk of 2% per trade (as per industry standard).
3. How much money do you need to make each year? Do you need to live off that money?
> Min. 30%. No.
4. Do you understand that you may have long losing streaks continuously (eg. 10 losses in a row)?
>Yes
5. Do you have the time to trade short term?
>Yes.
6. How much social contact do you need?
>None
7. Can you work by yourselves day after day? How much do other people influence you?
>Yes. None.
8. How much do you expect to nmake each year as a percentage of your trading capital?
>???
9. What risk level are you willing to tolerate in order to achieve that?
>???
10. How will you know your system is working/not working? What do you expect from your system in various type of markets (trending/Sideways/High Volatile/Low Volatile)?
>Conduct system test run once per quarter.
PART 3 : Trading Ideas
1. What kind of market do you want to trade? Is it appropriate to specialise?
> Need to specialise.
Type of market I want to trade :
- Volatile Sideways
- Involatile Trending
- Breakouts
- High Liquidity
2. Do you want any conditions to setup before you enter the market? What are they?
> Check psychology, trading data & equipment
3. How important do you think entry is?
>Very important (even though Van K Tharp thinks it's not important)
4. What is your stop loss plan? If you have been stopped out, how are you going to enter the market again?
> Initial stop loss : ??
Trailing stop loss :??
???
5. How do you plan to take profits?
>Possible methods :
Reversal stops
Trailing stops
Technical stops
Price objectives
6. What is your plan in terms of position sizing?
>???
Thursday, September 24, 2009
Tuesday, September 22, 2009
Market Beliefs
Update - 24 Dec 2016
1. Only 5% of traders makes money consistently from the market.
2. There are 3 types of market situation :
Uptrend
Downtrend
Sideways
3. There are 3 types of money market (in terms of risk profile) :
Securities (lowest)
Forex (mid)
Commodities (highest)
4. What successful trading is :
Protect principle
Lowest risks
Highest gains
5. Markets in terms of volatility :
Singapore (lowest)
Malaysia
US (highest)
6. Trading Uptrends and downtrend stocks is good for wealth accumulation.
Trading sideways stocks is good for income.
7. Income can be received via constant gain from trading or from dividends.
8. It is possible to become a millionaire in one market cycle (<10 years)
9. Market phase consists of 20 year periods.
Current phase is sideways (may continue for another 10 years)
10. To accumulate lots of wealth, Fundamental analysis is important.
To get income from the market, Technical analysis is important.
However, fundamental analysis is more difficult to grasp fully.
Technical analysis can be used in various markets.
11. Trader and investor have very different mindsets.
Trader emphasize Technical Analysis.
Investor emphasize Fundamental Analysis.
12. To have an edge over market, you must understand the market very well.
13. Trading components (from highest importance to lowest) :
- Self psychology (in trading)
- Market psychology
- (Other) Trader psychology
- Risk management plan
- Trading system
- Trading platform
14. Technical analysis is critical in :
- identifying where the money is (in which stocks) at the moment
- determine how to enter
- determine how to exit
- risk management
15. Even if you don't know fundamentals, you can still gain money from the market, just a matter of how much or less.
16. Stocks in market moves in cyles.
17. Capital preservation is the most important principle in trading. Followed by Risk Management.
18. To gain much from market, you must treat trading as a serious business.
19. I need hard work in first year to learn my trade.
20. Singapore market is the best place for me to learn trading due to low volatility. Thus easier to get out if trade goes wrong.
21. Learn from the Wizard traders.
22. Find and be the expert in my niche in market.
23. Position sizing is new to me but need to be learnt.
24. I am still a novice.
25. Trading is suitable for me as it suits my personality and is my hobby.
26. I will live and sleep by trading.
27. I believe in myself that I can control my emotions and I am rational enough.
28. It is possible to earn money from all type of markets anytime.
It is just a matter of earning more or less, fast or slow.
29. I need to improve my trading skills one item per month.
30. I only need to fully understand and be an expert in a few critical Technical Indicators; not all.
31. I need to create a trading system with good expectancy.
32. Technical Analysis components (start from highest importance) :
- Price Trend (MA, Fibonacci, Trendline, Bollinger, Support/Resistant)
- Price Pattern (Candlesticks, Flags)
- Volume (MFI)
- Indicators (divergence - MACD, Stochastics, RSI)
33. I need 1 hour pre-market preparation time. I need 1 hour post-market review time. Total of 2 hours per day.
34. Fundamentals are more important in US market than Singapore market. Singapore market is very much Technical Analysis.
35. Diversification is bad for professional trading.
36. Sometimes you need to be fully invest in market, sometimes you need to stay out of market (and that's the time to rest and review).
37. Major movement (in Singapore market) normally around 9.00-9.30am and 4.00-5.00pm
38. I still have a lot to learn.
1. Only 5% of traders makes money consistently from the market.
2. There are 3 types of market situation :
Uptrend
Downtrend
Sideways
3. There are 3 types of money market (in terms of risk profile) :
Securities (lowest)
Forex (mid)
Commodities (highest)
4. What successful trading is :
Protect principle
Lowest risks
Highest gains
5. Markets in terms of volatility :
Singapore (lowest)
Malaysia
US (highest)
6. Trading Uptrends and downtrend stocks is good for wealth accumulation.
Trading sideways stocks is good for income.
7. Income can be received via constant gain from trading or from dividends.
8. It is possible to become a millionaire in one market cycle (<10 years)
9. Market phase consists of 20 year periods.
Current phase is sideways (may continue for another 10 years)
10. To accumulate lots of wealth, Fundamental analysis is important.
To get income from the market, Technical analysis is important.
However, fundamental analysis is more difficult to grasp fully.
Technical analysis can be used in various markets.
11. Trader and investor have very different mindsets.
Trader emphasize Technical Analysis.
Investor emphasize Fundamental Analysis.
12. To have an edge over market, you must understand the market very well.
13. Trading components (from highest importance to lowest) :
- Self psychology (in trading)
- Market psychology
- (Other) Trader psychology
- Risk management plan
- Trading system
- Trading platform
14. Technical analysis is critical in :
- identifying where the money is (in which stocks) at the moment
- determine how to enter
- determine how to exit
- risk management
15. Even if you don't know fundamentals, you can still gain money from the market, just a matter of how much or less.
16. Stocks in market moves in cyles.
17. Capital preservation is the most important principle in trading. Followed by Risk Management.
18. To gain much from market, you must treat trading as a serious business.
19. I need hard work in first year to learn my trade.
20. Singapore market is the best place for me to learn trading due to low volatility. Thus easier to get out if trade goes wrong.
21. Learn from the Wizard traders.
22. Find and be the expert in my niche in market.
23. Position sizing is new to me but need to be learnt.
24. I am still a novice.
25. Trading is suitable for me as it suits my personality and is my hobby.
26. I will live and sleep by trading.
27. I believe in myself that I can control my emotions and I am rational enough.
28. It is possible to earn money from all type of markets anytime.
It is just a matter of earning more or less, fast or slow.
29. I need to improve my trading skills one item per month.
30. I only need to fully understand and be an expert in a few critical Technical Indicators; not all.
31. I need to create a trading system with good expectancy.
32. Technical Analysis components (start from highest importance) :
- Price Trend (MA, Fibonacci, Trendline, Bollinger, Support/Resistant)
- Price Pattern (Candlesticks, Flags)
- Volume (MFI)
- Indicators (divergence - MACD, Stochastics, RSI)
33. I need 1 hour pre-market preparation time. I need 1 hour post-market review time. Total of 2 hours per day.
34. Fundamentals are more important in US market than Singapore market. Singapore market is very much Technical Analysis.
35. Diversification is bad for professional trading.
36. Sometimes you need to be fully invest in market, sometimes you need to stay out of market (and that's the time to rest and review).
37. Major movement (in Singapore market) normally around 9.00-9.30am and 4.00-5.00pm
38. I still have a lot to learn.
Business Plan
1. Mission Statement
- To create and accumulate wealth consistently that is able to bring in passive income that is exceeding monthly expenses ($8k) by age of 48 via any trading activities.
- Trading as a serious business.
- Always protect original seed money ($150k).
2. Objectives (Beginner)
- My Goals
- Maximum allowable capital loss per year (2% = 3k).
- Minimum Risk :Reward Ratio (1:3)
- Expectancy
- Create all necessary systems for the business and implement with discipline.
3. Market Beliefs
See here
4. Understanding Market ???
- Singapore currently in ??? market
- Globalisation. Lots of invest funds cmes from other countries.
- Changes in rules, regulations and policies
- What are the leading indicators of stocks?
- What type of market? Volatile, non-volatile, trending, sideways
- What is the market trend for the past quarter (13 week period) ??
5. My Strength
- Easily understand great picture
- Ability to see overall picture
- No emotional impact when losing money
- Systematic thinking
- Discipline
6. My weakness
- Not enough knowledge (market, system)
- No defined trading plan and system
- Lack of patience
- Cannot control emotions when market is volatile
- Slow to get out of losses when stop loss is being hit.
7. Tactical Trading Strategies
- Find 3 strategies that I can use (and for which market type)
- Consider entry, exit, timing signal, expectancy, position sizing
8. Daily Procedures
Timing
- 8-9am - Review psychology, check system & previous decision
- 9-9.30am - Monitor and enter market
- 12-12.30pm - Monitor market
- 4-5.15pm - Monitor market
- 5.30-7pm - Review portfolio & next day market preparation.
Yoga
Diet
Trading psychology exercises
9. Educational Plan
What I need to know
- Psychology (Market & Trading)
- Market information
- Trading System
- Risk Management
- Review method
Self Weakness improvement method
Where can I get information :
- Internet
- Books
- Seminar
- Investment Fair
10. Worst- Case Contingency Planning
- Personal Emergencies - Close all trading positions and keep all investment positions
- Unexpected market disasters - Close all positions at market price at earliest period
- Equipment and Data Problems - Have a backup laptop, data analysis program, mobile internet connection/brokerage internet connection
- Major Life Changes - Decrease trading frequency or change all to long term fundamental investment
-Psychological/Discipline Problems - Stay out of market till issues resolved (for big issues); trade smaller quantity while resolving issues (smaller issues)
-Broker Problem - change broker
MENTAL REHEARSAL on all contingency plans !!!
11. Other Systems
Finance
- Cash flow & Budgeting
- What is the cost of running business
Data Management
- Backtesting
- Trading/Data Errors how?
- Does data account for splits, dividends, other adjustments?
Research
-on systems for each market types
Operations
- Human Resources
- Aim to be an Investor Trader that INVEST in Trading SYSTEMS
- At least be the Business-owner trader who owns and develops the systems.
12. Mistake Prevention ???
- To create and accumulate wealth consistently that is able to bring in passive income that is exceeding monthly expenses ($8k) by age of 48 via any trading activities.
- Trading as a serious business.
- Always protect original seed money ($150k).
2. Objectives (Beginner)
- My Goals
- Maximum allowable capital loss per year (2% = 3k).
- Minimum Risk :Reward Ratio (1:3)
- Expectancy
- Create all necessary systems for the business and implement with discipline.
3. Market Beliefs
See here
4. Understanding Market ???
- Singapore currently in ??? market
- Globalisation. Lots of invest funds cmes from other countries.
- Changes in rules, regulations and policies
- What are the leading indicators of stocks?
- What type of market? Volatile, non-volatile, trending, sideways
- What is the market trend for the past quarter (13 week period) ??
5. My Strength
- Easily understand great picture
- Ability to see overall picture
- No emotional impact when losing money
- Systematic thinking
- Discipline
6. My weakness
- Not enough knowledge (market, system)
- No defined trading plan and system
- Lack of patience
- Cannot control emotions when market is volatile
- Slow to get out of losses when stop loss is being hit.
7. Tactical Trading Strategies
- Find 3 strategies that I can use (and for which market type)
- Consider entry, exit, timing signal, expectancy, position sizing
8. Daily Procedures
Timing
- 8-9am - Review psychology, check system & previous decision
- 9-9.30am - Monitor and enter market
- 12-12.30pm - Monitor market
- 4-5.15pm - Monitor market
- 5.30-7pm - Review portfolio & next day market preparation.
Yoga
Diet
Trading psychology exercises
9. Educational Plan
What I need to know
- Psychology (Market & Trading)
- Market information
- Trading System
- Risk Management
- Review method
Self Weakness improvement method
Where can I get information :
- Internet
- Books
- Seminar
- Investment Fair
10. Worst- Case Contingency Planning
- Personal Emergencies - Close all trading positions and keep all investment positions
- Unexpected market disasters - Close all positions at market price at earliest period
- Equipment and Data Problems - Have a backup laptop, data analysis program, mobile internet connection/brokerage internet connection
- Major Life Changes - Decrease trading frequency or change all to long term fundamental investment
-Psychological/Discipline Problems - Stay out of market till issues resolved (for big issues); trade smaller quantity while resolving issues (smaller issues)
-Broker Problem - change broker
MENTAL REHEARSAL on all contingency plans !!!
11. Other Systems
Finance
- Cash flow & Budgeting
- What is the cost of running business
Data Management
- Backtesting
- Trading/Data Errors how?
- Does data account for splits, dividends, other adjustments?
Research
-on systems for each market types
Operations
- Human Resources
- Me
- Psychological
- Physical
- Mental
- Laptop (2x), Internet connection, phone, Electricity, trading platform (2x), data analysis platform (2x), Brokerage (3x)
- Quarterly maintenance
- Monthly Bill recording
- Aim to be an Investor Trader that INVEST in Trading SYSTEMS
- At least be the Business-owner trader who owns and develops the systems.
12. Mistake Prevention ???
Monday, September 21, 2009
Wizard Quotes
1. Learn to take losses.
The most important thing in making money is not letting your losses get out of hand.
- Marty (Martin) Schwartz, The Champion Trader
.
2. Risk Management is the most important thing to be well understood.
Under-trade, under-trade, undertrade is my second piece of advice.
- Bruce Kovner
.
3. The key is to lose the least amount when you are wrong.
- William J. O’Neil, IBD Founder
.
4. You have to minimize your losses and try to preserve capital for those few instances where you can make a lot in a very short period of time.
Those instances are when everything lined up in very good prospect: market, sector,stock all going up together. Then can afford to risk more.
Richard Dennis, Turtle Trading
.
5. The element of good trading are :
Cutting losses, Cutting losses, Cutting losses
If you can follow these 3 rules, you may have a chance
- Ed Seykota
.
6. Most successful traders achieve success by Controlling Risk.
Control risk goes against human natural tendencies. Risk control requires tremendous internal control.
- Dr Van K. Tharp, Trading Psychologist
The most important thing in making money is not letting your losses get out of hand.
- Marty (Martin) Schwartz, The Champion Trader
.
2. Risk Management is the most important thing to be well understood.
Under-trade, under-trade, undertrade is my second piece of advice.
- Bruce Kovner
.
3. The key is to lose the least amount when you are wrong.
- William J. O’Neil, IBD Founder
.
4. You have to minimize your losses and try to preserve capital for those few instances where you can make a lot in a very short period of time.
Those instances are when everything lined up in very good prospect: market, sector,stock all going up together. Then can afford to risk more.
Richard Dennis, Turtle Trading
.
5. The element of good trading are :
Cutting losses, Cutting losses, Cutting losses
If you can follow these 3 rules, you may have a chance
- Ed Seykota
.
6. Most successful traders achieve success by Controlling Risk.
Control risk goes against human natural tendencies. Risk control requires tremendous internal control.
- Dr Van K. Tharp, Trading Psychologist
Inspirations
ATTITUDE
The only thing that stands between a person and what they want in life is the will to try it and the faith to believe it is possible.
.
KINDNESS
It is one of the most beautiful compensations in life…we can never help another without helping ourselves.
.
BELIEF
Belief fuels enthusiasm, and enthusiasm, and enthusiasm explodes into passion. It fires our souls and lifts our spirits.
.
FOCUS
Having a simple, clearly defined goal can capture the imagination and inspire passion. It can cut through the fog like a beacon in the night.
.
PERSEVERANCE
Perseverance is not a long race: It is many short races, one after another.
The only thing that stands between a person and what they want in life is the will to try it and the faith to believe it is possible.
.
KINDNESS
It is one of the most beautiful compensations in life…we can never help another without helping ourselves.
.
BELIEF
Belief fuels enthusiasm, and enthusiasm, and enthusiasm explodes into passion. It fires our souls and lifts our spirits.
.
FOCUS
Having a simple, clearly defined goal can capture the imagination and inspire passion. It can cut through the fog like a beacon in the night.
.
PERSEVERANCE
Perseverance is not a long race: It is many short races, one after another.
Portfolio - MPHB
That AMESECURITIES system is very very cocked up!
Entered 3x my order without the system showing on the enter date. No wonder my balance looked very weird.
Anyway, today got stopped out due to end of contra margin. Wow, contra margin can have 10 days one in Malaysia. Woo Hoo!
Total loss is $2252.72. Should be losing only a third ($750.90) if not for the system cocked up.
Anyway, I practically had a 10% loss. Should have cut loss when stop loss was hit! Anyway learnt the lesson and better too, as the stock might be going down some more. Then I’ll buy in then.
Good luck!
Entered 3x my order without the system showing on the enter date. No wonder my balance looked very weird.
Anyway, today got stopped out due to end of contra margin. Wow, contra margin can have 10 days one in Malaysia. Woo Hoo!
Total loss is $2252.72. Should be losing only a third ($750.90) if not for the system cocked up.
Anyway, I practically had a 10% loss. Should have cut loss when stop loss was hit! Anyway learnt the lesson and better too, as the stock might be going down some more. Then I’ll buy in then.
Good luck!
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