Clappy:
I'm sorry your day didn't go well.
Clappy, most new traders burn out within the first 6
months because they lack the proper psychology, trading
tactics and money management. I'd like to give you
some practical advise so that you can survive in the
trading business.
PSYCHOLOGY
You should read the following book:
Trading for a Living: Psychology, Trading Tactics,
Money Management by Dr. Alexander Elder
amazon.com
I recommend that you concentrate on the Introduction,
Chapter I - Individual Psychology, and Chapter 2 -
Mass Psychology. The rest of the book is worthwhile,
but do not adopt the author's trading tactics.
TRADING TACTICS & MONEY MANAGEMENT
You should adopt the trading tactics and money
management principles described in the following
books:
*****
How to Make Money in Stocks: A Winning System in Good
Times or Bad by William O'Neil
amazon.com
In this book, William O'Neil describes his C-A-N
S-L-I-M method of stock selection, which combines
fundamental and technical analysis. This is THE BOOK.
The principles set forth in this book should form the
foundation of your trading business.
(NOTE: In his original book, O'Neil suggested that
traders limit their purchases to stocks with 5 to 50
million shares outstanding. O'Neil has modified this
principle to include larger capitalization stocks.
investors.com
Also, O'Neil recommends buying when stocks break out
of a limited number of consolidation patterns, such as
cup with a handle, double bottom, and flat base. I
feel that stocks can also be purchased when they break
out of other consolidation patterns, such as
symmetrical triangles, ascending triangles, etc.)
*****
24 Essential Lessons for Investment Success: Learn the
Most Important Investment Techniques from the Founder
of Investor's Business Daily by William O'Neil
amazon.com
*****
Reminiscences of a Stock Operator by Edwin Lefevre
amazon.com
Reminiscenes of a Stock Operator is the fictionalized
biography of Jesse Livermore, a successful speculator.
There are really two stories in this book. On the
one hand, there is the colorful biography of Jesse
Livermore and his trading exploits. But, beneath the
biography the author describes the successful trading
tactics that Livermore used. I recommend that you
study Livermore's trading tactics.
*****
I also recommend that you subscribe to Investor's
Business Daily newspaper: investors.com
and Daily Graphs Online: dailygraphs.com
FOUR CARDINAL PRINCIPLES OF TRADING
All successful traders follow the four cardinal principles of trading:
1) Trade with the trend
2) Cut losses short
3) Let profits run, and
4) Manage risk
CONCLUSION
Clappy, you want to buy good, quality stocks that are
breaking out to new highs on heavy volume after
consolidation. You also want the general market to be
in an up trend. This all goes back to the C-A-N
S-L-I-M principles.
Also, you don't have to trade every day, or every
week, or even every month. There are times when it
makes sense to stay out of the market. Now, might be
one of those times. You may want to get out of the
market for a while and wait for a good,quality stock
to break out of a consolidation pattern. It might
happen next week or next month -- but, it will happen.
If you buy at the right time you could latch on to a
stock that gains 20%, 30% or more in a matter of weeks or
months. Be patient. Look for these kind of setups.
Good luck, Clappy! |
