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Strategies & Market Trends : DAYTRADING Fundamentals
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To: Eric P who wrote (20)6/5/1999 5:57:00 PM
From: Tai Jin  Read Replies (2) of 18137
 
Eric, good thread!

I have to say that I could've saved tens of thousands of dollars if I had paper traded at first. However, as you say it would not be the same as trading for real. So I learned by losing real money. There is no better incentive to fix the problems than in seeing your account balance dwindle every day.

One thing I've learned is to not over trade. It's very tempting to do this especially when you are losing. But I can assure you that you will only lose more by doing so. It pays to take enough time to analyze the situation (using TA, etc.) before entering into a position. Impulsive (and compulsive) trading is no different from gambling. You also have to be patient. Don't chase a stock because you will more likely than not get in at the worst possible price. Stocks don't move in straight lines, so if you use TA and support/resistance lines, you will have a better idea of when and where to enter.

Another thing is to trade with sufficient capital that matches your trading style. Basically, don't put 50% into a single position - that can wipe you out quickly. It's best not to put more than 10-25% into a single position (some will say only 5%). So if you want to trade 500 shares of a $50 stock, make sure you have at least $100k in buying power. If you don't do this, you will be forced to take losses when the stock moves against you and those losses will quickly erode your trading capital. This happened to me - I started with $20k and lost $15k in a matter of weeks because I was putting too much into each position.

Now I've fixed most of my problems and trade with enough capital so that I have plenty of breathing room to ride out temporary moves against me. Many traders will tell you to stop out of losses, but I don't necessarily agree with that. As long as I am trading with the trend and the trend isn't broken, I will ride out the move against me and average down. But the key to this is in recognizing the trends and reversals. If you don't know which way the stock is going to move then it's best to stop out of the loss.

...tai
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