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Strategies & Market Trends : China Warehouse- More Than Crockery -- Ignore unavailable to you. Want to Upgrade?

To: hui zhou who wrote (5835)	4/21/2006 11:45:53 PM
From: RealMuLan	Read Replies (1) \| Respond to of 6370

Here is a person talking about his trading experience, interesting finance.groups.yahoo.com Hi All, I have been reading various comments about "waiting" for a trade to turn better. I get a quite nervous reading those statements. It is really an art on when to take profit and when to take a loss. It is much much harder for traders to take losses. I will share some of my experience and readings on risk management and position sizing. That's what I have been working on for the longest time. Not chart patterns, indicators or entry/exit prices. I hope that my writing will encourage some folks on this board to do more research and rethinking. I like hartail's generosity and I like the encouraging environment here, which is why I am taking time to do this. I started with 30k capital. My largest annual gain was +90k. My largets annual loss was -112k. After 6 years being a part time trader, I am just about to break even. There is still a long way to recover the commissions, education fees, all the hours I spent watching the market, and some sleepless nights. My biggest mistakes throughout these years: * trading on margin * taking losses too late * overextending my positions/ buying too many shares of the same stocks/ trading in the wrong direction. I seem to like to do this especially when I have already incurred losses because I caught the market at the wrong turn. So, what are the lessons learnt? * As Kathy says, never give up. * To do that, we need to make sure we always have the capital to recover. So first priority in trading is capital preservation. * It is OK to be wrong. Trading opportunities are just too many. It is ok to miss one. Just make sure you admit the trade is wrong before it is too late. There are simple formulas to figure out how much to risk in a trade. No discipline means no long term profitability. * Opportunity cost of holding on to losses means you are missing on perhaps better opportunities in other stocks, or even the opposite direction of the same stock! * Trade smaller sizes according to your total capital and the comfort level of the trade. Use this link as a starting point on position sizing tradermike.net * Always choose trade based on risk reward possibility. Playing earnings are very high risk and high rewards. So this is the process I go through in evaluating hartail's recommendations against risk: o Hartail's picks are from what his analysis shows the best reward o If I think his trades go against the market's trend and overbought/oversold condition, I will skip. I use very simple indicators like MACD, RSI, and some candlestick patterns on the daily charts. I do not know how to hartail comes up with his analysis but I always go with the market. o Since hartail recommends diversifying, I will pick at least 2 out of his 4 recommendations, always reducing my position size if necessary. I only see one stocks I won't trade that day. o I take loss as soon as the earnings is out. I will hold till the next day if the recommendation was right. o I will be interested in knowing how others on this board have utilize the recommendations. So far sice beginning of March, I have traded around 20 recommendations, and have earned a good chunk of pocket money. So, thank you again hartail! My trading bibles are Van Tharp's " Trade Your Way to Financial Freedom " and Alexander Elder's " Come Into My Trading Room" I highly recommend the books. ...