Hola. I want to get
something off my chest. I have been doing research for about 2 hours now on
stock trading strategies which I know isn't a lot of time but one thing is
bugging the shit out of me. Vague rhetoric. You know all of them, say them with
me ... Buy low-sell high, minimize risk, cut losses quickly, no plan is a
recipe for disaster, trade emotionless, know your limits, and they go on. This
is frustrating because this type of talk, verbiage, and rambling is
completely worthless. Never has this type of advice ever actually helped anyone
become a better, more knowledgeable trader. I'm a straight forward type of guy
and like it given to me straight, no chaser.
However, I was taught at a young age to not complain
unless you have a solution to the problem. So I will take these lemons and turn
them in to your mama’s homemade lemonade. Each vomit of words regularly spoken
above points me to a topic that I will need to dive into, destroy, dissect,
learn, become an expert on and implement into my trading plan/strategy. I know
they are eluding to some important ideas and I’ll touch on each in future
posts.
Phhew, I feel much better now. Let’s get to work. When I
sat down at my computer this morning I had flash backs to a time where I was
trying to learn how to fly. Airplanes that is. There were several clear moments
early on in my career that I realized I was so uneducated on the subjects we
were learning that I didn't even know what questions I needed to be asking my
instructors. Simply put, I didn't know what I didn't know. I can tell you it’s
a feeling of helplessness, panic, vulnerability, and pure stupidity. Man this
sucks, I wish I was a genius.
To get around this rut is fairly
simple luckily. Google. The ultimate knowledge database. Half of it its
information likely wrong so it’s our mission to sort through what will help us
get to the end goal. The plan as I've said too many times now is to make a
plan. Problem is I don't know how to do that. So I started with a simple
search "How to develop a Trade Strategy".
A long time later ...
Here are some questions I'm going to tackle for my Trade Strategy/Plan in no particular order:
1. Day trade or Swing trade?
This article breaks down the two vaguely:
http://www.investopedia.com/articles/active-trading/052815/pros-cons-day-trading-vs-swing-trading.asp
http://www.investopedia.com/articles/active-trading/052815/pros-cons-day-trading-vs-swing-trading.asp
Trading Days Summary: day trading is making a bunch of trades throughout the
day, it’s a full time job, you can make lots of money or lose lots of money and
is stressful. Swing trading is making trades that last multiple days or weeks,
it doesn't require you to monitor it all day, you can make money or lose money,
and is less stressful.
This one seems pretty straight forward to me. I have a full
time job that I won’t be quitting any time soon so I'll be focusing on swing
trading. Done.
2. What will I trade? (stocks, FOREX, options, currencies, etc.)
I'm going to skip this one for now. I need to do a lot
more research. I believe how much money I'll be starting
my brokerage account with will drive the answer to this
question.
3. How much risk am I
willing to accept? (Dang I hate the sound of that)
I'll dive into this subject another time as well. It’s one
of the vague subjects I talked about above.
4. What are my goals?
This makes sense to me.
I've always believed you need to have goals in life. They determine your
purpose and what you strive for. I need to find some good guidance on what kind
of goals are realistic and achievable. It will be important that these are
written down with my Trade Plan and are very clear and specific.
5. Set enter/exit rules.
This is the concept that you would not enter into a trade unless you meet the
rules you have created in the Trade Plan. If the situation doesn't meet your
predetermined rules you don't make that trade. Simple. I've also seen people
refer to a checklist they complete before each trade. I like the checklist
concept (I'm in the aviation career field) and will try to make one myself. As for
what the rules would be, or what the checklist would have on it, I have no
clue. Add it to the list of stuff I don't know.
6. Keep extensive records of your performance.
Hence, the blog ... for
now this is what I will use to keep track of my journey. However I know this
subject is much more involved when I start trading. Super generally I'll be
keeping track of each trade and all the details surrounding it that made me
think it’s a winner. What contributed to me getting into the trade and out etc.
I believe there are some slick tools online that will help me with this process
but I'm still a ways form placing my first paper trade.
7. Mental Approach/Emotions.
This seems like a weird
topic to tackle but several articles have mentioned it. Most recommend you
even add it into your written Trade Plan which tells me I need to take a closer
look.
8. Post Trade Analysis.
I think this will be
just as important as the actual Trade Plan I will develop. I'll need to create
a very detailed was to judge my performance after each trade is complete. It
will need to be quick, efficient, non-bias and consistent. As for how all that
would work I don't know yet.
9. Trade Process.
This ties into the
entry/exit rules but is at a larger scale. I'll need to develop a system on how
to approach my trading. Right now I'm so naive that I wouldn't know the
first step but again I think being consistent with my processes will
eliminate stupid errors and increase efficiency. The more efficient I am the
less time I spend on this and the more money I make. I like to think my time
is precious.
In my head a trade process might sound like:
- Asses personal state
- Am I mentally in the game? Any personal issues that
might affect my performance and decision making?
- Am I physically ready? Food? Water? Sleep?
- Set-up desk/workstation
- Review news of the day
- Review portfolio
- Analyze current trades still in-progress
- Search for possible new trades
- Run checklist on new possibilities
- Execute new trades
All these questions come roughly from this article:
It’s an ok read. I
mostly used it as a stepping stone for ideas.
Alright. Enough for now.
Got a lot of avenues to explore over the next few days.
-RJL
*CAUTION*
The author of this blog is inept in the writing of the English language. He has no clue what he is doing and is sorry for the run on sentences, countless typos, horrific sentence structure, lack of vocabulary, blatant misuses of pronunciation and overall suck. He doesn't proofread and is too embarrassed to ask others to do it for him. He offers his sincerest apologies for your bleeding eyes.
*CAUTION*
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