Successful Stock Market Trading

Monday, January 25, 2010

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Successful stock market trading begins with a winning trading plan. It's as simple as that. If you develop a well-conceived trading plan to guide your actions in the stock market you will already have the advantage over most of your market competition. Put simply, it gives you the edge you need to win over the long haul when trading the stock market or forex market.

A stock market trading plan will not guarantee your success in the markets, but a good plan will enable you to work methodically toward your stock market trading goals while reviewing on a regular basis what is working and what is not. It will act as a roadmap for your trading journey. It will enable you to respond positively and constructively no matter what happens with your individual trades. And, most importantly, it will help you control the only thing a trader can control: his or her own actions.

Finally, stock market trading is a business. It can be a fascinating and sometimes thrilling business, but in the end it is a business. A trading plan helps you treat it as a business.

Learn To Trade Stocks

Learning to trade stocks is no easy matter. But it's not impossible. You have to set yourself out to spend some time to do research and to monitor your positions every once in a while. I have been trading stocks for over 15 years. I can remember my early years of trading. I would get into a position and then when I saw that it was going against me, I would get out, often at the very wrong time. I say that because the next day or week the stock surpassed where I had bought it from.

Learning to trade stocks requires some skill but it also requires you to shed some of your ingrained, inbred emotions. It's these very emotions that caused me to sell stocks too early in by beginning days of trading. I have overcome these emotions now and I have a set of rules that I follow religiously. That doesn't mean that I can't change the rules of my system but I have to give myself a good reason to do so. If I don't change my system than I stick to them. That is how I keep emotions out of the equation.

The most important way to help yourself when learning to trade stocks is to come up with your own system and practice. But practicing with real money can be costly. Some people refer to this as your tuition but what if you could avoid putting real money on the line and still get the practice you need?

A way to do that is by a concept known as paper trading. Now, there are critics of paper trading that state that because you are not putting real money on the line you will not have the same kinds of emotions that you would had you put your hard earned cash in. They also state that you will not get the same kind of fills that you would when you trade for real. There is some truth to these statements but it shouldn't stop you from pursuing paper trading because there are ways to reduce the aspects of paper trading that are criticized.

To counter the first item, paper trading is still experience. Yes, the emotions are not the same but what you are really doing is trying to get a feel for whether your system is working or going to work. The second item's counterpoint is if you take the midpoint of the bid and ask at any given time of the day or at the close, you would likely get filled at those levels had you traded real money. That's because it falls within the range of the bid/ask spread. I have used this technique when trading for real and with the exception of super fast moving stocks, I almost always got filled.

I think if you want to go about learning to trade stocks you need a system and you need to be able to practice trading. You want to be able to do both of these without putting up a whole lot of capital (none if you can get away with it). One system that I have found that is indispensable and reliable is the CANSLIM method.

A LOSER’S GAME

Thursday, January 21, 2010

Investing in the stock markets is not a winner’s game, but a loser’s game. There is a big conceptual difference between these two types of games. In a winner’s game, the game is won by the winning actions of the winner. In a loser’s game, the game is lost by the losing actions of the loser. In the latter, the game is won by the player who makes the fewest mistakes, whereas in the former, it is won by the player who makes the maximum number of right decisions. In a loser’s game, the final outcome is determined by the number of wrong decisions, and not by the number of right decisions, that each player makes. Losers’ games have another important characteristic. The winner does not win, but the loser defeats himself by making mistake after mistake.


How and why is stock market investing a loser’s game? In the stock markets, your chances of success depend upon the errors of others. All buying and selling opportunities arise out of the over-reactions of the majority of the other players who constitute the market. If they do not consistently and systematically make errors of judgement, you would not get an opportunities become available only when other players make mistakes- the bigger and more common the mistakes, the greater the opportunity to make big profits.

MARKET GRAPHS

Sunday, November 15, 2009

All stock market investors dread political instability, war, civil strife, political unrest, insurgency or any other political development that might have a effect on the business environment. These real and imaginary fears give rise to confusion because most of the investors have not developed standardized responses for dealing with political uncertainties. When confronted with a grave crisis of a political nature, most investors tend to panic and either sell too soon, or hold back from exploiting the great buying opportunity created by such a crisis.

However the point to note is that against this dismal record of political and economical problems, and despite strong opposition from entrenched vested interests. India succeeded in pushing through a bold economic reforms program that set the economy back on the path of a strong recovery. Also despite this disturbed and unnerving political scenario of the last ten years, the average Indian investor succeeded in multiplying his capital by 50 times.