I have finished part one of the article on trade management. Part 2 on Money Management coming very soon
http://tradingforaliving.netfirms.com/article3.htm
Enjoy[
] Comments/constructive critisism welcomedWayne
Another good one, thanks Wayne.
Wayne,
Good article and well written. For me personally this is the hardest thing to master when trading. It’s easy enough in theory but when it comes to the heat of the battle and emotions are running high, that’s when you need a plan like the ones you have outlined. Having said that though a plan is useless if you don’t have the discipline to stick to it!!!
Something I know too well!
Richo.
Richo
Ask anyone who has finished my course if they learnt about discipline. Its easy to say “get disciplined, stupid!” and quite another to teach people what discipline is and how to acheive it (the main goal of the “investor psychology” section in the course).
Although waynes article is good, its not really anything that hasnt been said a hundred times before. Then again, I spose its of benefit to newbies. But realisticly, if wayne wants to help newbies, the best thing for him to do would be to show the statistics, then say “you have a 95% of failing at this. I suggest you dont even attempt trading for your own good” instead of providing a “how-to” service where the likely end result is loss of capital, despite his best efforts.
Guns dont kill people, people kill people.
Stocks dont kill peoples wealth, people kill their own wealth.Crashy,
I have followed your posts and Waynel’s with great interest.
I really need to learn more about the share market – practicle, entry level stuff for someone who is willing to go in for maximum gain over about a 5 year period.
What would you suggest as a good starting point for education on this kind of thing? And what can I do immediately to position myself well for entry into the market?
What the mind of man can conceive and believe, it can achieve.
Crashy,
To be fair I don’t think Wayne is advocating anyone to just go out and start trading after reading his articles. The fact is a lot of people don’t know where to start and I believe Wayne’s articles provide a very good ‘reference point’ for further investigation. Maybe it has been said “a hundred times before” to you, but for others it maybe new and very valuable info. Valuable info that Wayne provides free of charge.
I too have read about most of the things Wayne has to say, however it’s nice to compare notes. Besides, it’s not like he’s trying to sign anyone up to one of his courses…. yet!
Crashy,
I agree that much of Wayne’s article has been said before, however as Richo said it’s always good to see it again both for reinforcement and also for those that haven’t “seen it all”.
Richo’s spot on, discipline is the hardest part.
Rod.
Im something of an expert on discipline, not because I am good at it, but because I was so BAD at it. We only investigate our practices when things go wrong. When everything is ok, we dont bother to study our habits, improve and learn new things. When things keep going wrong, we investigate, analyse, research, learn and improve. This is how I learnt so much about discipline.
I failed miserably as a trader for the first few years, because I had shocking discipline. This failure forced me to read everything I could about trading psychology, but most trading books simply said “you MUST be disciplined!” well duh. Just because I knew that, didnt mean I could actually do it. Just because you know what you should do, doesnt mean you can actually do it when it comes to the crunch.
I could not find the answer in trading books, so I began reading psychology books, and researching the experts in discipline; the military, and martial arts. I found that discipline was something that could be learned, but it wasnt just a switch you could turn on. A huge chunk of the course focuses on the steps to acheiving and maintaining discipline, instead of regurgitating every other trading book by saying “use discipline!”. People cant use it if they dont know what it is, how to get it or how to keep it.Even now I am not a 100% disciplined trader, which is why I choose not to trade in the short term. I have certain mental traits which inhibit my abilities to be disciplined. Some people just cant do it, some can improve, while others can master it. By studying your own traits, you can decide if you should be a trader or an investor.
Wayne sounds like he has mastered his own trading discipline, great for him.
Hi guys,
Thanks for comments, I really am looking for constuctive critisism so I don’t mind any well meaning negative as well as positive.
A few points from the conversation so far.
I created the website for a couple of different reasons. Firstly, trading full time can be incredibly boring at times. When one is sitting around waiting for the right setups there is little to do apart from bickering with other traders on internet forums….fun for a while, but ultimately pretty futile. It is something positive to do instead of twiddling my thumbs.
Secondly, I have many (non trader) friends who have absolutley no concept of what it is I actually do. They have this trader stereotype in their heads of a stressed out inveterate gambler with an ulcer and a stready stream of valium to keep him going insane. But they know me as a quiet, fairly introverted, relaxed guy with a permanent smile. They don’t understand…. so the website is a vehicle for them to understand what I do.
Thirdly…”it’s not like he’s trying to sign anyone up to one of his courses…. yet!” hahaha, Richo. Yes further down the track if I get enough material together I will put it together in an e-book. The price will be very modest as I don’t need to make money from selling books or courses. But thats a long way off and anybody is welcome to the material as it’s being built for free.
Re Crashies comments:
“its not really anything that hasnt been said a hundred times before.”….thats true. But 95% people I meet have never heard it before. My wife is a sports coach. What she says has all been said a hundred times before. So why do people go to her? Because they like the WAY she says it. For them it makes sense when she says it. Hopefully people will like the way I say it and gain some benefit.“you have a 95% of failing at this. I suggest you dont even attempt trading for your own good”….. I have attempted in a limited way to explain why people lose. Honestly, psychological/disipline factors aside, it is so easy to make money from the share market with very simple systems. I can show people a medium term 100% mechanical system that does very nicely. I have talked to many mny people who have had a dabble in the share market(and lost), invariably it is because of casino mentality and the lack of a sound trading plan….AND NO MONEY MANAGEMENT
“instead of providing a “how-to” service”….Is not all information, including your course, about how to? Of course! What I hope to achieve is to help people survive and protect capital…and how to go about generating positve expectancy…. profits will look after themselves.
Re disipline: some very good comments from crashy there. Without self disipline, all people know may amount to nought. But disipline starts with a blueprint….a plan. No plan, no disipline.
Thanks again for the comments[
]Cheers
WayneSome advice for when you do youe “e-book”
When I began writing my course, I was advised to make a list of everything I knew, regardless of how trivial. Then I was told to go through, and eliminate anything that had already been covered by an earlier book or course. That seemed a bit weird to me, I thought “its been covered before because its important, what could possibly be left that is important?”
Finance is complex, and constantly evolving, which means new products and concepts are created all the time. Also, investment conditions change rapidly, and the average investor cannot keep up.
Many of the books I read were full of omitions, lies, oversights and errors, and were usually biased towards “its soooooo easy to make money” rather than “dont do this, and watch out for this.” Negative books dont sell, which is why most authors stick to the positives.
So here are my tips:
– be brutally honest, omit nothing
– be original
– dont make false promises (ie saying trading is easy)
– find out what every other trading book is missing, and provide it
– create a niche
– dont waste the book rehashing old concepts. show us things you learnt that weren’t in books.
– T.A has been done to death, give it a miss
– every trading book has at least one simple unique idea. gather them all up and put them together in one book.
– dont do all this work for free. If people make money from what they read, why should they profit from your work while you get nothing?Chow Gar Tong Long Kung Fu is a fantastic learning tool.
It will teach you all about being honest with yourself, knowing your limitations and diciplinging yourself to stick to them.
Mind you, from what I know most good martial arts teachers will teach you a lot more than just how to look after yourself.
What the mind of man can conceive and believe, it can achieve.
Hi Wayne,
Thanks for the article. Again it was an interesting read.
One question: What is the mathematical formula for the “trailing exit” strategy?
Cheers,
Pin
Hi Pin,
That is just one of many that may be used according to what you want to do.
If you have metastock the formula is:
pds:=21;
mult:=Input(“Width of Stop”,.1,10,4);
chandelier:=C-(mult*ATR(pds));
stop:=If(C<=PREV,chandelier,If(chandelier>PREV,chandelier,PREV));
Max(stop,Ref(stop,-1));+ a few other coding tricks but thats the basis of it.
In english:
The highest price traded, minus…
4 * the 21 day average of….
(High – Low + absolute(High – yesterdays Close) + absolute(Low – yesterdays Close))/2Cheers
] Comments/constructive critisism welcomed
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