Hints and Tips
- Low price, high volume = Educated buying in progress.
- Protect your capital from losses {use stop losses}
- Growing your capital and finding the best returns are the two main goals of any trader.
Your trading capital is the “TOTAL” amount that you have available for trading. Your main goal is to have this entire amount exposed to the marketing various trades.
Restrict your losses to a maximum of 2% i.e. if your portfolio is $ 100,000 {I wish] then the total would only be $2,000, not enough to wipe you out. Remember as you add your profits it will change your percentage.
- Develop a clear trading plan {written down] that sets the conditions for selection for either buying or selling your shares.
- Don’t give up your daytime job, {unless you are already retired. Lucky you!}Until your income from trading is matching or is higher than your wages.
- Many successful traders are using just the same methods that are available to you i.e. charting, end of day data, company announcements etc. They also make losses although some won’t admit it. It is how you minimize those losses that count.
For losses are guaranteed. Your trading “edge” comes not from the information that you gather, but how you implement it and put it to use. Remember everyone has the same information available as we do, {sometimes earlier.}
- There is lots of information available to you, this site for instance, check the free download section where you will find new information being added quite often.
- Buy on the rumour and sell on the news.
- Work out your entry price and exit price first before buying your stock.
- Momentum ties price movement together and helps to measure the acceleration of price over several days.
- Overnight volatility is caused by the impact of news events. Volatility describes how much we expect a stock to move on any given day.
- When the share price shows that on all the last 5 days, prices are higher than the last previous closing price. This means a Bullish market. If the opposite is happening then you have a Bear market.
Volume
Volume is the “fuel” there are two usually two types of volume. These are High volume and Low volume.
High volume on a lower close in share price indicates selling pressure. Everybody wants to get out, nobody wants to buy. So in able to sell the stock the share price goes downwards.
High volume on a higher closing share price indicates buying pressure. Everybody wants to buy, but nobody wants to sell. So traders have to bid a higher price to obtain the stocks they want. This forces the share price upwards.
Risk
Every time that you trade in the stock market you are exposing your self to risk.
The main risk is the amount of money that you can lose if the stock you have chosen suddenly decides to go downwards in price.
The one way to minimise this risk is to have a stop loss in place.[see previous article called “stop loss”]
How you handle this is by having an idea of the amount you can afford to lose, You should have this already worked out beforehand and written down in your trading plan. This brings us to the percentage you can use. The one that I use is the rate of 2% of the “TOTAL” of my trading capital.
Your main aim in trading is to have the entire amount i.e. $20,000 exposed to the market in various trades.
Do not have all your eggs in the one basket as the saying goes. So the most you can lose in any one trade is $400.00 .This in effect saves you from being wiped out in one fell swoop.
Remember as you add profits to this will change the percentage. .Let’s hope you do this as often as possible.
I hope this has been of some help.
In the meantime Happy trading!