Good Investing Lessons

In order to get positive return in the long run, we need to have positive expectancy in our trading system. In trading, the best edges come from the market behaviors caused by cognitive biases. To find an edge, you need to locate entry points where there is a greater than normal probability that the market will move in a particular direction within your desired time frame. You then pair those entries with an exit strategy designed to profit from the type of moves for which the entry is designed. Simply put, to maximize your edge, entry strategies should be paired with exit strategies. To understand why this is important, let’s dig further into the components that make up the edge for a system. System edges come from three components: Portfolio selection : The algorithms that select which markets are valid for trading on any specific day Entry signals : The algorithms that determine when to buy or sell to enter a trade Exit signals : The algorithms that determine when to buy or sell to ...

Drawing from the teachings of Turtle Traders, I must keep my trades to myself and increase confidence and faith in myself. The Golden Agri case is a classic example. I bought at 0.315 on 15th July and it went up to 0.335 the next day. I happen to call a friend (who is a full time trader, sort of) for some sharing. He warned me to sell away stocks that are in-the-money to cash out quickly because overall market seems to be soften. That prompted me to sell off my Golden Agri at 0.315 for a quick profit (5.5%). Sounds good for a one-day job. After selling, I realized that I had made 2 mistakes. One, I was succumbing to fear of losing because I didn't justify the selling by the chart and the counter did not hit my stop loss. Two, I was not sticking to my rules and consult my charts before making any moves. Important Rule: Trading is a lone game (Jesse Livermore, Turtle Traders). Do not discuss your trade with other people. This important rule was both mentioned by Jesse Livermore and T...

One of the key factor in successful trade is the set the stop loss at the right place. Selling off too early is often the cause of my losing trade and at the end I sit and wait to see the stock move up much higher that it was and could has resulted in reasonable profit. I sold off Ascendas India Trust at 0.68. I was getting impatient over this counter. Within the next 3 trading sessions, it went up to 0.71. Healthway was sold at 0.10 and it closed at 0.105 on 17th July. Parkway was sold off at 1.69 on 17th July during intra-day and it turn out that it was closed at 1.71. Now the counter looks a little bullish. Again, the same mistake as the above 2 counters. Looking back at my records, I could have made a lot more money if not for selling off too early. I was able to pick the right stock but often too early in the stage. But if I has set my stop loss a little lower, those trades would not have been prematurely sold off. Another issue is the trading horizon. I seems to be very impatient...

Dos and Don’ts for Thinking Like a Turtle 1. Trade in the present : Do not dwell on the past or try to predict the future.The former is counterproductive, and the latter is impossible. 2. Think in terms of probabilities, not prediction : Instead of trying to be right by predicting the market, focus on methods in which the probabilities are in your favor for a successful outcome over the long run. 3. Take responsibility for your own trades : Don’t blame your mistakes and failures on others, the markets, your broker, and so forth.Take responsibility for your mistakes and learn from them.