Good Investing Lessons

Here are the steps to build your own system: Designing a High Reward-Risk System for Managing Money Expectancy = (Probability of Winning * Average Win) Minus (Probability of Losing * Average Loss) Ensure Reward to Risk Ratio is above 2. That means Average Loss should be small and Average Wins should be big. Set stops that will be reasonably small. Do not enter trade is the stops has to be too large for comfort. Use systems to spot opportunities that will provide better probability of winning. NOTE: It is extremely dangerous if you are not adequately capitalized. Many traders failed due to excessive draw downs. By simple probability, the bigger player always wins against the smaller player. Technique I -Get Best Reward-to-Risk Ratio and then Leverage Yourself Have a system that can spot good opportunities. Not quite duplicable. It involve good return with small draw downs. 5-1 is not quite achievable. 2-1 is generally possible and good enough. Above that would be great. Technique 2 -Op

Nicolas Narvas: There was no doubt in my mind now that I could not make money by buying a stock and then trying to cheer it on. JONES & LAUGHLIN had convinced me of that. I could remember how I almost felt myself willing and pushing that stock upwards. It was a very human feeling, but it had no effect upon its market any more than spectators have on a horse race. If one horse is going to win, it will win, even if thousands of onlookers are cheering for another one. It was the same now. I knew that if I bought a stock and turned out to be wrong, all the cheering and pushing in the world would not alter the price half a point. And there was no telling how far the market might fall. I did not like the trend, but I knew it was no use trying to fight it. The situation reminded me of George Bernard Shaw's remark at the opening night of one of his plays. After the curtain fell everyone cheered and clapped except one man who booed. G.B.S. went up to him and said: "Don't you li

JACK SCHWAGER TRADING GUIDE The following notes have been taken when I read Jack D Schwager’s book: Getting started in Technical Analysis. Apart from the technical knowledge of identifying opportunities, Jack emphasized much on trading discipline so that even when your ability to spot a good trade is only 50% accurate, you can still turn up a winning position overall by using proper risk control. The idea is to be able to cut losses short and let the winner run. To start trading full-time, you must treat is like normal working so that you will cover all the activities need to ensure sustainable earning. PREPARATION TO TRADE FULL-TIME Step One: Define Trading Philosophy / Strategy How do you plan to make trading decisions? (a) TA (b) FA (c) Both Step Two: Choose Market / Product You can trade in multiple markets. For a start, focus on one. Note the diversification and volatility. Step Three: Establish Risk Control Plan 1. Maximum risk per trade (example $200 or $500) 2. Stop Lost

Money Management is the most important component of investing and trading. Van Tharp (Definition): Money management is that portion of your trading system that tells you “how many” or “how much.” How many units of your investment should you put on at a given time? How much risk should you be willing to take? Aside from your personal psychological issues, this is the most critical concept you need to tackle as a trader or investor. “Risk management is the most important thing to be well understood. Undertrade, undertrade, undertrade is my second piece of advice. Whatever you think your position ought to be, cut it at least in half” - Bruce Kovner “Never risk more than 1% of your total equity in any one trade. By risking 1 %, I am indifferent to any individual trade. Keeping your risk small and constant is absolutely critical. ” - Lamy Hite “You have to minimize your losses and tv to preserve capital for those very few instances where you can make a lot in a very short period of t